Income protection is often something that people don’t consider until later in their lives. But new research shows that financial advisers believe people should be considering income protection much sooner.
The research, carried out by Royal London, acknowledged that, despite its many benefits, Income Protection isn’t the easiest protection to sell. But, under-35s are a particularly difficult bunch to reach. A massive 74% of advisers believe people are failing to address their protection needs until it’s too late.
What is Income Protection?
Income protection insurance pretty much does what it says on the tin.
Consider if you were suddenly unable to work. How would you pay your bills? Do you have enough savings to see you through? How much sick pay would you get from work?
This is what income protection insurance is for. It helps to cover some loss of earnings should you be unable to work, whether that is due to serious illness or injury.
Income protection insurance will provide you with a regular income. Usually around 50%-70% of your monthly income. It continues paying out until you can return to work, you retire, pass away or the policy term ends, whichever is sooner.
If you become ill again once you recover from your injury or illness, you are able to claim again on the same policy.
How much does income protection cost?
As with all insurance cover, it depends onthe policy you choose and your circumstances.There are a number of factors which will be taken into consideration.
- Your age
- Your job
- If you are, or have been, a smoker
- The percentage of your income you would like to cover
- The waiting period before the policy pays out. The longer you wait, the less you will pay
- How long you would like to be covered for
- The range of illnesses and injuries covered
- Your health – which includes your current health, your weight and your family medical history
When are people buying income protection?
Generally, individuals come across Income Protection for the first time when buying a house. What with house prices rising, first-time buyers are waiting longer before taking the plunge. Therefore, taking out Income Protection later on in their lives.
Statistics from healthcare and protection insurer The Exeter showed the average age of claimants is now 40. However, on certain types of products, this dropped to just 33. So, a lot younger than you may have thought!
So, why should young people consider income protection sooner?
Young people are more likely to cover their mobile phones than their income. Chances are, they feel young and healthy and don’t expect to get ill. This often leads them to seeing income protection to be an unnecessary expenditure. Especially if they don’t have a mortgage or children.
However, no one expects to get ill! This is the exact reason why we believe everyone should get income protection as soon as they start work. And in fact, having youth and health on your side can only be a good thing when taking out a policy. It could knock the premiums down.
Save your savings
Young people are far less likely to have a chunk of savings to fall back on. Any savings that are in the pot will quickly disappear if you’re unable to work. Paying rent, keeping up with bills and having food in the house to eat quickly adds up.
Some figures suggest nearly half of young people, between the ages of 16-24, could only cover their cost of living for a month if they were unable to work.
Remember, it takes much longer to save than to spend money! Imagine how disheartening it would be for those having to spend their savings in this way. They could have been saving for a wedding, then be forced to start again if they do fall seriously ill without the safety net of income protection.
How can we encourage under 35s to take out income protection?
The fact is, income protection Insurance isn’t talked about enough. If under 35s don’t buy a house or seek financial advice, they probably won’t hear about it. Or, if they do, they believe it to be needless and too expensive.
Royal London’ research suggests raising awareness of income protection and its benefits is key. Whether that is engaging with a younger audience on social media platforms, or making it easier to apply for protection online. So we’re here to tell you about it now!
Health and Wellbeing is a hot topic for those under 35. We’d like to see income protection becoming part of the conversation. According to The Exeter, 10% of claims they now receive are related to mental health – something equally relevant to people of all ages.
We think it’s also worth highlighting long-term implications. Missing mortgage payments, for example, will affect an individual’s credit score. This could, in turn, have an impact on their financial stability in later life.
The unfortunate fact is very few of us would receive full sick pay from work. Even if you are one of the lucky ones, it will probably only last for around six months in most cases. So the best solution is to be prepared should the unexpected happen.
Get in touch with us today if you would like to talk through your options. Encourage the young people in your lives to do the same!