Furlough And The Importance Of Income Protection:
Recent times have highlighted the importance of planning for the future on an unprecedented scale. Those entirely unaffected by Covid-19 are few and far between. So, it’s little surprise that the benefits of looking ahead have come firmly under the spotlight.
The Current Situation
The UK government’s response to Covid-19 was to roll out a number of measures aimed at saving lives and jobs. The Furlough Scheme was one of these measures, serving as a lifeline throughout the various Covid-induced lockdowns. Costing in excess of £73bn, we saw some 8.9 million employments furloughed at its peak in May. And, although that number has steadily reduced since, the preliminary figures for September are still set at around 2.7million. It has acted as a wake up call. Without some form of support, many would not have made it through this year, financially. It is true that the events of 2020 are unique in their severity and coverage. So, too, that a state furlough scheme differs from the kind of income protection that insurers can provide. However, it still serves as a stark reminder that protecting your financial future is an important consideration.
What is income protection insurance?
Income protection insurance policies are designed to provide you with a payout should you be unable to work. And that can be whether the result of illness or injury. If you have an accident or fall ill these policies will cover part of your salary, usually around 60%, in a similar way to the furlough scheme. Generally, these schemes will cover you until you can work again, until you retire, or until the policy ends. It’s worth noting that there will usually be a waiting period before you are eligible for a payout. The longer you can wait between your last paycheck and your first insurance payment, the lower your premiums will be. Some can cover shorter periods of time, and be cheaper as a result. The policy that’s right for somebody else may not be right for you, so if you are considering taking out an income protection insurance plan, it’s recommended to seek professional advice before acting.
The effects of Covid on income protection insurance
As the pandemic has put a spotlight on the potential instability of incomes due to a health crisis, more and more people are looking to income protection for the future. As a result of this increased interest, some income protection providers are introducing new terms for both current and future policy holders. Specifically, these terms include increasing flexibility for applicants who have experienced an impact on their income through furlough and also introducing ‘career break’ options, giving policy holders the opportunity to pause their premiums and claims should they desire to. The insurance products available from different providers are constantly developing. So, if you are interested in exploring the opportunities available to you and looking for advice, please don’t hesitate to contact us. We’d be happy to help!
Written by Ian Barnett
Ian is an experienced Chartered Financial Planner as well as being a Fellow of the Personal Finance Society, with over 25 years’ experience in the financial services industry. With a broad range of client experience and expertise, Ian specialises in financial matters from Pre-Retirement Planning to Inheritance Tax Planning and all points in between.