According to some fairly recent research*, only a small proportion of the working population has any form of income protection. Despite income from work being the only financial means of support available to the overwhelming majority of people, only one in ten has income protection. Of the nine-tenths who have none, a surprising two-thirds either have no clue how they might cope if they were unable to work – and their income was abruptly withdrawn – or have quite unrealistic expectations about where any financial support might come from.
The research revealed, for example, that many individuals put their faith in being able to fall back on their savings. In reality, however, the average level of savings, when compared against the average level of expenditure, would last less than two months at most. Indeed, personal savings are at such a low level that more than a third of the country’s work force has less than £500-worth of savings to fall back upon. Again, when compared with average levels of expenditure, such a relatively small amount would last a mere 11 days. All in all, therefore, the notion of savings as an adequate source of income protection seems quite unrealistic.
It is surprising, too, how relatively few employees are aware whether or not their employer will continue to pay their salary if they are unable to work because of sickness – and many of those who do know, remain unaware of what proportion of normal pay will continue to be paid or for how long. Nevertheless, it is estimated that broadly a half of the work force has no sickness benefit protection at all from their employers.
Of the current work force of 25 million or so, approximately one in eight are self-employed (and with redundancies currently so rampant, this figure is likely to be growing fast). The self-employed obviously have no access to employer-provided benefits if they are unable to work because of an accident or illness, yet only an estimated one in ten has any form of income protection.
It is surprising to discover such misplaced faith in the imagined sources of support in the event of an accident, illness or unemployment depriving an individual of their normal working wage. It is the more surprising when effective and affordable income protection is so readily available by way of a simple and straight forward insurance, income protection insurance.
Income protection backed by this form of insurance will provide a regular, replacement monthly income in the event of the policy holder’s incapacity to work (because of an accident or illness) or their involuntary unemployment. In the event of a claim, the insured benefits are paid out, free of tax, every month until the policy holder is able to resume normal working, has secured alternative employment, or for up to a typical maximum of 12 months, whichever is the soonest.
* Yorkshire Building Society – The Protection Gap, July 2008
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