Ella Weinberg: Why Income Protection Insurance Matters in the UK

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SPEAKER_02: Let’s start with like what do you feel like is the most important insurance type that someone should 100% have in this employee, business owner?

SPEAKER_03: Income protection. Hands down, income protection. That’s the policy that basically A, it pays you whilst you’re still here, but that’s the policy that essentially gives you, if you’re self-employed or you’re a business owner, you’re not entitled to any sick pay. Do you know what I mean? Statutory sick pay for those who are employed is minimal anyway. But when you’re self-employed, that literally is down to zero. And if you’re a business owner and you’re running a business and you’re then trying to fund, continue to fund your salary, you’ve got to think of the impact that if the work’s not being done but the money’s still being spent, there’s still a loss somewhere. So yeah, income protection basically pays you. If you are signed off sick, if your doctor says you’re not fit for work, you’re able to receive a monthly income. Of course, the policy varies on the person, um, but essentially there’s no occupation that cannot get income protection. Um, even when it comes to sickness, a lot of people steer away from it because they think, oh, I’ve had this in the past or I’ve had that, it’s gonna be massively expensive. There’s an income protection policy for everyone. But bottom line is, I think when we think of even just like a cost of living crisis, our income is more important now than it ever was before. You know, funding goals, funding lifestyle, whatever it is, we want to make sure that even just in day-to-day scenarios, if we’re gonna be signed off work, we’re not dipping into things like savings, we’re not, you know, relying on parents or taking out a loan or falling into bad credit. We’re using a policy that is exactly what it’s designed for, being able to pay you when you need to take some time off.

[01:54] Sammie Ellard-King:

And roughly, in your experience, then, like how much does that cover?

SPEAKER_03: I would say, um, and of course it varies from person to person. The three sort of major things that are taken into consideration, amongst others, but it’s always gonna be someone’s date of birth, um, someone’s BMI, um, smoker status, and then of course, their income. So someone who earns a lot of income is going to pay more than someone who earns minimal income because it just means that the payout is gonna be greater, but it’s adjustable. What I usually say to most people is are you willing to sacrifice anywhere between one and three percent of your annual salary to cover what your income protection would be on an annual basis? That’s usually what I kind of say as a rule of thumb, because it’s very, very rare that someone is paying more than that. And like I said, it’s adjustable. So if someone’s taking home £2,000, they may not necessarily need the full £2,000 in the event of them being signed off sick, because of course, you’re not really going anywhere, you’re recovering. So, you know, the takeaway budget and the you know the nights out and etc. aren’t really being used up. Do you know what I mean? So maybe 1,500, 1,400 kind of suits your needs a bit better. Um, and most income protection policies will cover that. They’ll cover anywhere between 60 and 70%, and there’s a lot of providers that cover the full 70%. Bearing in mind as well, that’s covering your salary post-tax, not pre-tax. So you take into consideration a 30k salary, which is your gross, even though what lands in your bank account is only 2,000, your income protection is based on the gross, not the net. Um, and yeah, one 1 to 3%, if that’s like when you think of that over an annual basis, it’s not a lot.

[03:35] Sammie Ellard-King:

That’s crazy. And so you are literally secure if something happens to you, bills, mortgage, covers pretty much. Exactly.

SPEAKER_03: Yeah, yeah. Literally just your salary. Yeah, it’s just your spending money. Just think of the same, whatever those expenses are, um, providing someone’s not living like you know, right on the breadline, because then it’s not to say that you’re not entitled to any income, but of course, just managing that whilst you’re off sick may still be of some difficulty. But like you said, mortgage or rent, gas and electric, um, all of those core expenditures, you’ll be in a position to continue with those at ease because your income protection is going to be bringing you in money every single month, and every single month until you’re in a position to go back to work. I feel like a lot of us, you know, might need to take time off, but we’ve just pushed through because, of course, the money situation is such a big, a big headache, or people who are using up things like annual leave and and stuff like that. So, yeah, at least it just kind of gives you that peace of mind.

[04:33] Sammie Ellard-King:

Yeah, because there’s so many people that are like work until they’re overly stressed, yeah, and they don’t go and get signed off for like two, three months, which is the time that they need to like reset themselves. Exactly, fully recover.

SPEAKER_03: Yeah, and that’s the thing, income protection covers you for accidents, sickness, injury, and that’s in a mental health capacity as well. So, yeah, if someone’s suffering from burnout or is then thinking, I’m at the end of my tether, and it shows up in different ways. You know, your diet goes, um, your immune system goes, migraines, you get tired, those are the signs, those are the symptoms that people need to be paying attention to and thinking, okay, right, I need some time out now. And if your GP can recognise that, your GP’s gonna sign you off at the end of the day. And take, if you know that the money’s coming in, like you said, you can take that necessary amount of time to fully recover, not just get over a cold and then rush back to work, and then three weeks later you’ve now got a cough, and then six weeks after that it’s a chest infection. No, fully recover because the money’s coming in, and then you just have that peace of mind and don’t have to worry.

[05:31] Sammie Ellard-King:

Why do you think that like we don’t do income protection as much as we should?

SPEAKER_03: I think it’s a combination of things. I think, don’t get me wrong, it’s definitely a mind build because there are a number of different policies to sort of consider. The most common one being life insurance. They see that on the TV, brands like Vitality, who are brokers, insurance companies, but they’re brands as well because they sponsor the athletes and things like that. They’re always hitting home when it comes to life insurance. Um, because income protection is a bit more complex, I think it’s harder to translate in a 30-second advert or things like that, which is obviously where I’ve been able to kind of fill a gap and you know fill a niche when it comes to trying to communicate that. But it is definitely the most undervalued out of all of the policies. About 4% of those who are self-employed have income protection. So when we think of how many are running business or self-employed, 4% of those people actually even bother to have a policy. But I think even when it comes down to financial literature, I think that is a minefield on its own. And when it comes down to people always kind of assume that if you’re going to get financial advice or support, you have to go to a financial advisor. And when we think of financial advisors and the advice that they give, which is brilliant and the work that they do, insurance is then really undersold even by them. Even my mortgage brokers, a lot of mortgage brokers are actually qualified to put in place insurance policies. But everyone gets so focused on their niche or their speciality, and it just always gets missed because it’s just something that you set up, you pay your direct debit, if you need it, it’s there. If you don’t need it, you keep it ticking in the background. So it just gets massively overlooked. It’s not like savings and budgeting where people see the immediate effects from. I think insurance companies are doing a lot better now to sort of um incorporate a lot more benefits that clients can take advantage of. But I think that’s always been the premise, either that they don’t pay out, so there’s a massive stigma, or there’s just not enough benefits, or why do I bother?

[07:31] Sammie Ellard-King:

Okay, okay. And then obviously, if you secured yourself, say like with an emergency fund as well, then you’ve got like a double buffer happening there. And if Yeah.

SPEAKER_03: And I think that you know, you being sick isn’t an emergency, it’s a part of life. You shouldn’t have to use that. And again, with your savings, if you if you’re working towards maybe buying a house or buying a car or holiday, whatever that savings is for, imagine working hard every single month and putting aside a proportion of your income to then fall sick and then take that same money to support you whilst you’re off work. No, when you know, for imagining your income protection policy paying you, and let’s just say that you’ve got a really good balance between your income and your expenditure, like maybe your total expenses only equate to 50% of your income. What that means is actually when your income protection policy is paying you, because it pays you 70% of your income, you’re still in a position to pay all your bills and still save and still invest and do all of those other things that are contributing to your financial future. That’s a win-win as far as far as I’m concerned.

[08:35] Sammie Ellard-King:

Oh, yeah, 100%. Like I think you hit the nail on the head there. Like you shouldn’t have to use your hardware and savings to supplement your lifestyle because you know you broke your leg and you can’t make it to work or whatever that might be. Like it just doesn’t seem fair, does it? But I suppose it’s why it’s there in the first place, anyway. But it’s yeah, and you know, we have to try and educate people to try and get themselves up to those levels in the first place. But this is uh just a thing you can do today, sign up today and then exactly so easy, so easy.

SPEAKER_03: I always say to people, you know, if you can find an advisor, obviously, someone like myself or someone else, then do have a conversation because we don’t charge for consultation because we always get paid by the providers for doing all of their admin and their hard work. Income protection, you actually, it’s not a policy that you can go and get by yourself. You do have to speak to someone specialized or qualified to put it in place, yeah, just because of the complexity. So I always say go and have a conversation. If you feel comfortable, get a variation of quotes, you know, if I take the maximum amount, if I take a bit less, or if it’s immediately within budget, you get a cooling off period anyway. So even if you run through the application, you get covered there and then. Brilliant, because you’ve got 30 days like any other insurance policy to read it through. If you’re speaking or dealing with a good advisor, they’ll always be on hand. You know, insurance brokers are kind of well, certainly I am in the way that I advise. We’re there for life, we don’t really go anywhere. So if you’ve got a claim, you know, if you’ve got a claim or you need further support, go back to them. Do you know what I mean? That’s that’s that’s what they’re there for. So reading through all of the literature in the first 30 days, yeah, chances are it’s not gonna make any sense. You’re gonna be like, what is section 5b point? What like what does that mean? Take advantage because it is a bit of a minefield, but that’s exactly what they’re there for. But that’s always what I say. If you know there’s somewhere that you can seek advice from, go and seek it. Because compare the market, money supermarket, all of those platforms, they’ll give you a quote, but they’ll give you a quote, it’s not going to be accurate. You don’t even know whether you’re gonna be fully insured for it either. So you’re kind of just stabbing in the dark.

[10:42] Sammie Ellard-King:

100%. Like we had to take out life insurance for our policy, our mortgage policy. Yeah, but we didn’t even know what we were signing up for. And I don’t even think I still do to this point now. But I think I’m covered for like God knows like 50 illnesses or something. Yeah, yeah, like that’s as far as I went with it. Because it’s like, oh okay, I need it and it’s good, and I know that it’s gonna if I you know I get hit by a bus tomorrow, my partner gets half the mortgage, and that’s how it should be. You know, in my eyes. I’m like, great, she’s secure, vice versa. Um, and we both pay into it, and I feel like that’s that’s a good thing. But so what what’s the difference then? So there’s like critical illness cover.

SPEAKER_03: Yeah.

SPEAKER_02: So how does that differ?

SPEAKER_03: So how it differs is to be honest, income protection, which is why I say it’s the best one, is it covers you for everything. So income protection covers you for your everyday sickness, accident, injury. But if you think that, let’s say, that’s a critical illness as well, God forbid someone’s diagnosed with cancer and is obviously going to need to take a few months off work or maybe have some surgery or treatment, you can actually still claim that on your income protection because theoretically you’re covered for everything. Where critical illness cover now becomes more specific is there is a set of definitions that are included in your policy. So, like you said, those 50, etc., you’ll have a standard and then different providers will have different, they call it definitions. Um, so it’s how they interpret that particular illness. For example, cancer can be from stage one, stage two, grade one, grade three, etc. But essentially, you’re covered for a critical illness. Think of it as like compensation. If you’re diagnosed and it meets the definition, so your consultant has confirmed that you’ve got this diagnosis, whatever the value of your critical illness policy is, that’s what you receive as a lump sum. Tax-free. So use it for private health care, use it for, you know, you know, supplementing your income. If you’ve got income protection as well, use the two of them together, brilliant. If you want to go and take some time out and travel the world because you’re going through a bit of a crap ordeal, do it. You’re not, you don’t have to pay the money back if you make a full recovery, which is obviously what we hope. But yeah, essentially, lump sum payout if you’re diagnosed with a critical illness. But income protection is a monthly recurring income and you can claim multiple times on the policy.

[12:56] Sammie Ellard-King:

Does it work uh for maternity or paternity at all in those cases?

SPEAKER_03: There are elements of maternity that do work. So being pregnant as a whole isn’t classified as being sick, so to speak. But if someone falls sick whilst they are on maternity leave and that is preventing them from either being able to do their daily activities, or let’s just say someone was, you know, considering going back to work and now they’ve fallen ill in whatever capacity, and it can be pre-baby or post-baby, but in whatever capacity, if it’s preventing you from doing something, you 100% are entitled to a claim. And there are a lot of critical illness policies now that are also including pregnancy-related complications as well, that then allow you to make a claim on your critical illness policy.

[13:42] Sammie Ellard-King:

Okay, that’s really interesting because obviously, like postnatal depression is like quite a big thing and it’s on the rise. And you’ve got like, then that’s an issue that’s stopping you going back to work, and that’s when it could kick in.

SPEAKER_03: 100%. So let’s just say you’ve got your income protection policy, you’ve had a smooth pregnancy, baby’s born, you’ve had your nine months’ maternity leave, you’re thinking, right, I’m ready now, mum’s on board, she’s gonna take care of the baby whilst I head back, and then suddenly you’re just hit with that overwhelming postnatal depression, not quite sure what it is, head to your doctor, doctor comes for confirms. And like you said, postnatal depression can actually be something quite complex to deal with because it can have highs and lows. So something like that is a brilliant example where yes, 100% claim, take the necessary time off. You might be able to go back to work for three months, and guess what? It might just hit you again and you’re all over the place. Make another claim. And your premiums don’t go up every time you claim, it’s not like car insurance, home insurance.

[14:37] Sammie Ellard-King:

That’s gonna be my next question.

SPEAKER_03: Yeah, yeah, it stays the same. So if you’re paying £27.83 a month for your income protection, it’s gonna be £27.83 for the lifetime of the policy.

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