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If an accident or long-term ill health prevented you from working, how would you cope financially? Your employer may pay you for six months, or if you are very lucky, up to 12 months on half pay. What if you are self-employed or run your own company? You may have some savings to fall back on, or some continuing income from a spouse or partner. But would this allow you to continue with the lifestyle you are accustomed to?
Income protection is arguably more important for single people or for families with one (or one main) bread-winner, as there is usually no-one else to help if your income stops.
Apart from any compulsory legal requirements, you insure your car, house, contents and valuables to avoid having to pay replacement costs or third party damages. However, if you think about it, the income that you earn is far more valuable over your working life than any of these material items. An income protection plan can provide you with a tax-free monthly income until the selected plan end date (normally chosen to coincide with your planned retirement age), or¬†until you are fit enough to return to your usual job if sooner. This should be the foundation for all of your financial planning, as without income protection, if your income does stop due to an accident or long-term ill-health, the impact on the rest of your financial planning could be serious.