Monday, June 21, 2021

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Income Protection for Parents Explained

So many of us have a handful of financial worries in this current climate – and it’s not pleasant. There’s never been a more important time to talk about income protection for parents and the importance of protecting your income. Pandemic or no pandemic, none of us are invincible and any number of things could render us out of work unexpectedly.

When you become a parent, any financial worries you have get kicked up a notch. You have a little tiny life to look after and provide for, and every penny counts! What better way to protect them and your lifestyle by having some sort of life insurance in place? 

If you become sick or injured, income protection insurance will enable you to pay your bills and provide for you and your loved ones whilst you’re out of work. It protects your income and provides some respite exactly when you need it most.

Income protection for parents – how does it work?

Income protection insurance allows you to pay your bills and provide for your family by providing regular (often monthly) payments to replace part of your income – usually 50-70%. You’re more likely to be off work sick than you are to pass away before retirement, so in many ways, income protection insurance is the most essential cover out there!

If you are employed, you might be eligible to receive sick pay from your employer if you can’t work. However, this does not apply to everybody and some people might overestimate how much they get. It’s not an awful lot – particularly for a family household.

Every policy will come with a deferral period that you will set when buying your policy. This is the period of time that must pass after you make a claim before your policy will begin paying out. It could be 4 weeks or 6 months. The longer the deferral period, the cheaper the monthly premiums. Whatever your deferral period, it’s important to remember that during this period, you’re going to want some money to fall back on whilst you’re not working. It’s recommended to keep around six months’ earnings tucked away to tide you over during your deferral period so that you can keep life ticking over as normal.

Income protection for parents –is it expensive?

The amount you’ll pay per month in premiums depends on a few things; your age, your line of work, your hobbies, your current health and medical history, and the level of coverage that you’d like.

If you’re thinking, ‘I’m fit and healthy – I don’t need to worry about life insurance yet’, then just remember – it’s generally cheaper to take it out whilst you’re low risk. If you wait until later in life when you’re more likely to develop medical issues, you’ll end up paying more.

What about if I am self-employed?

When you are self-employed, it’s all on you. No sick pay, no maternity pay and no pension from an employer. If you become sick, you will still have bills to pay for your business and it’s down to you to get them paid. Of course, there are endless amazing benefits to being your own boss – but most people will admit that financial worries are potentially the hardest thing.

That’s why it is a really good idea to factor something like income protection into your business plan, so that you and your family can still get by without your income. If you are self-employed and taking out income protection insurance, your monthly income is based on your share of the pre-tax profits generated by your business. The amount of cover that you’ll need depends on the size of your mortgage and whether you have taken out any loans to build up the business.

If you’re a parent, and especially a self-employed parent, then don’t put off income protection any longer. If you want to research further, there’s a huge amount of information online and it can sometimes get a bit overwhelming, so remember, it’s worth considering chatting to an insurance broker if you need some tailored advice.

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