There are numerous circumstances and reasons people take out insurance. Some are mandatory like cars, property, land or any other item that acts as security against a loan, after all a mortgage is in fact a secured loan. However the take up for income insurance is so very low and industry experts are at a loss to explain why. Even mundane household objects are usually insured under the contents insurance side of the policy. The majority of people take out travel insurance when they book a holiday just in case they have any health issues while away from the UK. The question is, why do people not feel the need to protect the the thing that makes such a difference to our lives?
Let's face it if your income stops for any length of time how do you plan to retain your existing standard of living? The answer is you cannot because the meagre state benefits (that's if you qualify for any) will certainly mean you have to cut down on the way you have lived before. This can mean different things to different people For some it may be having to trade in the second car, for others it may be no more holidays abroad. However the worst scenario is when you cannot pay your mortgage and the house is re-possessed. If losing your home is not bad enough you then find it has decimated your credit rating so that borrowing money in future can become virtually impossible. It is amazing how people insure or take out a warranty on their Mobile Phone but state they cannot afford to insure their income and in most cases not even bothering to find out how much it will cost.
So what is the product called to insure your income? The industry name is Permanent Health Insurance (PHI) but it is more commonly known as Income Protection. PHI is so called because the provider cannot cancel the policy, regardless of how many claims you make or how long one particular claim lasts for. The policy can be taken out so it coincides with your retirement age so someone taking out a policy at 30 and intending to retire at 65 would have a policy lasting 35 years. All benefits are tax free and it can be designed to fit around most occupations, for example a self employed person would probably want benefits to start ASAP but someone employed who receives full pay for six months would defer payment for that length of time.
Obviously the longer you defer receiving benefits the cheaper it becomes. There are a few guidelines that the government lay down regarding the amount of benefit you can take, up to a maximum of 60% of your gross earnings less any state benefits is the current rule. So the message really should be look at getting yourself some income insurance cover to protect you and your families future lifestyle and speak to a consultant who can best advise you on these matters.
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