Expecting the Unexpected: Protect Your Income
Looking to the future is something most of us only do in the short-term. We think ‘it will never happen to me’, or ‘we’ve got better things to spend our income on’ and unfortunately planning for the worst is simply not a priority.
The sad truth though is that none of us are immune to illness or injury, which could keep us away from work and considerably impact our lifestyles.
Future-proofing – just in case.
At the very least look at your expenditure habits, be honest with yourself with regards to how long it would take you to return to work, even factor in the possibility of losing your job due to sickness and then looking for new work once you are better. That should give you an idea of how many months worth of income you will need to replace.
That figure should be your initial savings target, before you even think about investing a single penny into stocks and shares. There’s no point investing in stocks and shares which are long term investment vehicles if you have to disinvest at the wrong time, it could cost you and your family a lot of money.
Serious illness or injury that stops you from working is a real concern and affects hundreds of people each year. Consider the following facts:
- Nearly 1 million people a year are off work long term sick
- Most common long-term work absence is stress, mental health and musculoskeletal injuries
- Musculoskeletal injuries are more common for manual workers and stress is more common for non-manual workers.
You can read more here: http://www.legalandgeneral.com/library/protection/sales-aid/W13952.pdf
What would you do?
If you were one of those 1 million, or maybe your willing to take that chance? Maybe your thinking population in the UK is around 64 million so it appears as if it’s a 1 in 64 chance. A chance that you are willing to take. BUT, the working population is 31 million, so, now that’s a 1 in 34 chance and we haven’t got to considering your current health, dietary habits, exercise habits and current mental health. If we were to factor those in, the statistics could look a lot scarier.
An income protection policy usually protects your income upto 50% of your gross salary. It’s at 50% primarily to encourage you to return to work and if it is used in conjunction with your savings it can be a useful way to help you manage your finances when things are not going so well allowing you to focus on your recovery. What’s more, is that it is permanent, this means once you have been underwritten you can make as many claims as you need to if you return to work and then become unwell again. The benefits are also tax free.
Disclaimer: The information contained within this article are provided as illustrative purposes only based on legislation at the time of publication. Nothing in this article should be construed as advice or guidance to one’s personal situation. The value of your investments may go up and down, similarly, other aspects of your wider lifestyle and financial context may impact on your objective. In a nutshell, don’t rely on blogs and the articles for personal advice, and always seek advice from a qualified professional.