The unseen risk: Why you should consider Income Protection

While it’s a scenario we’d rather not think about, the reality is that without our ability to work, we’d struggle to afford to live.

In truth, the number of people leaving the workforce due to long-term ill health in Britain is at its highest rate since the 1990s. [1]

Findings show that there were 2.7 million people out of work due to long-term sickness from November 2023 to January 2024. [2]

And, sadly, there are several factors causing Brits to fall out of the workforce. [3]

Mental health challenges and musculoskeletal problems are cited as some of the main reasons for people to need long-term time off work, while accidents, injuries or illnesses and other health factors are also contributing.

Coupled with this, less than half of Brits admitted to having £1,000 of savings in the bank [4], while one in six have no savings at all, leaving very little safety-net for households if income was to stop. [5]

So, what can I do to protect my salary?

What is Income Protection Insurance? | Vitality

Relying on state support

Of course, for anyone that does fall ill, there are some options that can help you financially.

Those eligible for Statutory Sick Pay can get £116.75 a week (around £500 a month) for up to 28 weeks. This is paid through your employer in the same way as normal wages, either weekly or monthly.

Statutory Sick Pay is, however, still subject to tax and National Insurance, and has been criticised as being too low to protect people from financial hardship, a government report said. [6]

For those who are self-employed, they must rely on other state benefits – such as Employment and Support Allowance – to cover their costs if they are unable to work. [7]

Income protection is peace of mind

The good news is that there is another way to safeguard your income. Income Protection is an insurance policy that provides a monthly income if you are unable to work due to illness or injury.

This tax-free pay out can be put towards your finances while you recover, such as paying your bills, mortgage or rent and childcare costs.

And record numbers of British workers are now taking out this protection in case they are unable to work.

According to the Association for British Insurers, sales of new policies in 2023 were up 16% on 2022. [8]

Similar to the wider market, Vitality is also seeing year-on-year growth in its Income Protection policies. [9]

While these numbers are encouraging, there is still a large proportion of the population who are not covered if they are unable to work.

“While it’s encouraging to see more people taking out Income Protection Plans, there is, however, a very large proportion of UK population who aren't protecting their income and have very little in the way of a financial safety net in place,” says Rob Harvey, Vitality’s Adviser Editor.

Real life Income Protection success

Take Vitality member Julian, for example. As a self-employed electrician, it’s paramount that he is in good health in order to work.

An accident while skiing, however, put that in jeopardy. Thankfully, his injury was only mild, but having stretched a ligament in his shoulder, it meant he would need three months off work.

His Income Protection policy with Vitality paid out £4,000 to help him cover his costs, giving him peace of mind while he recovered from his injury.

“It was a relief my Income Protection plan paid out”

Julian, Vitality member 

Vitality’s Income Protection also grants its members access to support services that help them to rehabilitate when they claim.

This could be access to physiotherapy and mental health services, as well as cancer support.

Meanwhile, the Vitality Programme offers discounted gym memberships from partner brands and spa breaks, which are not only there to help you stay healthy and productive while working but could also benefit you during recovery too.

Vanessa’s story

When 59-year-old GP, Vanessa, was stuck in a traffic jam on her way home from work, the last thing she expected was to be back in hospital. A lorry had ploughed into her car, leaving her with multiple fractures and a bleed on the brain.

Her Income Protection plan, which she’d had in place for more than 10 years, meant she received full sick pay for six months, followed by another six months half-pay, while she made her recovery.

Simon’s story

After Simon’s business took a knock during the pandemic, his relationship broke down and as a result his mental health deteriorated.

Self-employed Simon was dependent on his income. Now unable to work, he was facing financial challenges, as well as health. Even though he was eligible for Universal Credit, it wouldn’t cover the costs of his everyday needs.

Thankfully, his Income Protection cover pays him a further £1,300 a month – and continues to claim today.

Sources:

[1] A U-shaped legacy • Resolution Foundation

[2] A U-shaped legacy • Resolution Foundation

[3] Sickness absence in the UK labour market - Office for National Statistics (ons.gov.uk)

[4] Savings statistics: Average savings by age in the UK (finder.com)

[5] Savings statistics: Average savings by age in the UK (finder.com)

[6] Statutory Sick Pay - Work and Pensions Committee (parliament.uk) 

[7] Employment and Support Allowance (ESA): Eligibility - GOV.UK (www.gov.uk)

[8] Record number of individuals take out income protection insurance to safeguard finances | ABI

[9] Research into Vitality Income Protection members

Related: When and why do I need life insurance?