Income protection insurance provides a regular replacement income if you’re unable to work due to illness or injury. It’s an important consideration for anyone vulnerable to financial hardship if their earnings stopped. With his keen understanding of UK consumer concerns, Martin Lewis offers useful perspectives on income protection insurance – who needs it, what to look for in a policy, and why shopping around matters.
Who Needs Income Protection Cover According to Martin Lewis
Martin Lewis suggests income protection merits consideration for:
The self-employed and contract workers – If sickness prevented you from working, there would be no employer sick pay to fall back on. Income protection provides a replacement income stream.
People with limited savings – If unable to work for 6 months or longer, personal savings would soon be exhausted for most people. Income protection kicks in after an initial wait period.
Those with dependents – Your family relies on your income. Income protection offers peace of mind that their financial needs can still be met.
Anyone desiring financial security – We can’t predict if or when a serious illness may strike. Income protection offers a safety net to focus on recovery, not money worries.
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Shopping Around is Critical, Says Lewis
Martin Lewis emphasizes that not all policies or providers are equal. Comparing premiums and cover levels across multiple insurers is essential. Key variables include:
- Percentage of income covered
- Deferred period before benefit payments begin
- Payment period duration
- Definition of disability in the policy
- Mental health limitations
- Rate of premium increases
The cheapest premium often means the most restrictive or inadequate cover. Seeking professional advice can prove worthwhile for more complex personal situations. Revisiting your policy as income and life situations evolve is also prudent.
Look Beyond the Premium Price Tag When Comparing
The premium is naturally eye-catching when comparing policies. However, Martin Lewis underlines that cheapest doesn’t automatically mean best value. Pay close attention to aspects like:
Cover Percentage – Aim for replacing a minimum of 50% of your gross income. The higher the percentage covered, the higher the premiums.
Deferred Period – Most commonly between 4 and 52 weeks. The longer you wait for payments, the lower the premium. But can you float financially for that long?
Benefit Payment Period – Ideally until your selected retirement age or state pension age. Some policies pay for only 1-2 years.
Definition of Disability – Look for “own occupation” and a broad, rather than narrow, definition. Makes proving a claim easier.
Mental Health – Most now offer some coverage but limitations persist in some policies. Scope this out carefully.
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Concerns and Misconceptions: Lewis Sets the Record Straight
Some common worries about income protection stem from misunderstandings Martin Lewis has aimed to clarify:
Pre-Existing Conditions – Most policies only exclude related claims in the first couple years then offer full cover.
Unemployment Cover – Income protection only covers you if unable to work due to illness/injury. Doesn’t pay out if made redundant.
Tax Implications – Benefit payouts are treated as taxable income. Tax efficiency still makes it worthwhile.
Mental Health Limitations – While still an issue, providers are making improvements in this area as attitudes evolve.
Final Words of Wisdom from the UK’s Money Saving Expert
Martin Lewis offers this closing advice regarding income protection insurance:
- Worth budgeting for if you’d struggle financially if unable to work.
- Shop carefully for the policy meeting your needs and budget.
- Thoroughly understand inclusions, exclusions and definitions in a policy. Avoid nasty surprises if needing to claim.
As Martin Lewis’ enduring popularity reflects, British consumers trust him to cut through financial jargon and complexity with practical, impartial money guidance.
His advice to thoroughly compare income protection policies, yet not let price be the sole deciding factor, serves as useful direction to anyone considering this cover.
Ultimately, income protection merits consideration for those vulnerable to financial instability if unable to work. And such financial peace of mind allows focusing energy on recovery, not money worries.
Daniel, a seasoned professional with over 5 years of experience in banking, property, and finance, brings a wealth of expertise to the table. This authoritative blog is meticulously curated to provide you with the most up-to-date financial insights. Delving into the dynamic realms of banking and mortgages, Daniel’s passion for finances shines through every post.
