If you are employed, you probably get sick pay – Local Government people usually get 3 months full pay, followed by 3 months half pay if they are off sick for a long time.
I guess you’d set this as the level to regard as good.
People with smaller companies will often get less, although smaller companies could easily and quite cheaply change this by taking a corporate version of what I’m about to talk about.
So, you have sick pay, and maybe some savings. How long could you last financially if some illness or accident befell you?
Well, unless you are particularly lucky, that will be a question you don’t want to dwell on, but, it’s a solvable problem and often not expensive.
Income Protection – often called Permenant Health Insurance (PHI) will effectively replace your take home pay if you can’t work long term for health reasons.
This is how it works – lets take our Local Government officer and assume they earn £36,000 pa.
They become ill. They get their sick pay for 6 months, but then they just have state benefits – £75pw roughly for incapacity benefit, maybe some tax credits as well, but not £36,000pa.
PHI can be set up to kick in at the 6 month mark and pay an income. The income is tax free, so we don’t need to worry about covering the whole salary, in fact, the rule of thumb is to cover half – £1500pm. That, plus state benefits will be roughly what they are used to living on.
How much would that cost? Well, it depends on age and job and state of health, but not much, especially considering what a problem solver it is – an estimate? £25 – £30 per month.
If you couldn’t last 6 months you can set the income to start after 1,2 or 3 months and there is a 12 month option too – the sorter the ‘wait’ period, the higher the premium.
How does this compare to Critical Illness cover?
Critical illness cover pays out a lump sum, not an income. Also, there is a set list of illnesses and their definitions, whereas PHI doesn’t have an ‘illness list’, it asks if you can do your job.
It’s very popular amongst teachers – although they are more expensive to cover owing to the stress of the job – but that is also why it is popular – Stress – is not a critical illness. But, stress can take you out of work, and PHI can deal with that.
Contact me if you’d like exact figures.
