Why income protection is a better option than state benefits

With nearly ten million jobs being put on furlough and almost three million claims being made under the Self Employment Income Support Scheme during the coronavirus pandemic, awareness of how unexpected events can wipe out our income has arguably never been higher.

But what happens when the support ends? With so many people turning to the Government for help, are we in danger of creating a false picture of over-reliance on the state to help us when we are unable to work?

Why we shouldn’t bank on state support

The Government’s financial support package during the coronavirus pandemic was an exceptional response designed to help UK workers in exceptional circumstances, replacing up to 80% of salary at the peak of the pandemic. But this level of income replacement is far higher than is normally paid should we be unable to work due to illness or injury. And despite the growing awareness of our financial fragility, how many of us still really consider what life could be like would be like if we had to live off benefits such as Universal Credit?

It’s time to take control

Everyone needs to take greater responsibility for their future financial health, which includes considering how they could afford their outgoings if they were unable to work.

With IP, policyholders can protect a much larger proportion of their income than they would receive under state benefits. This provides policyholders with a greater financial cushion should they experience a drop in income due to illness or injury.

With IP, policyholders can protect a much larger proportion of their income than they would receive under state benefits.

Steve Bryan
Director of distribution and marketing, The Exeter

IP doesn’t penalise people responsibly building up a savings pot and payments can start on the first day of an illness, unlike Universal Credit, where the first payment routinely takes five weeks to arrive.

Beyond this, IP policies are far more flexible than Universal Credit. Payments can be made until claimants are 70, whereas receipt of Universal Credit stops at the individual’s state pension age. In addition, IP claims are only assessed on the policyholder’s income, not that of the household.

IP claims are also based solely on the policyholder’s ability to do their own occupation, meaning they can concentrate on their recovery rather than having to find alternative work to make up for a shortfall in income which may happen under Universal Credit.

Putting income first

At The Exeter, we believe that it’s time we put income first when it comes to every client conversation.

Thankfully, record sales of IP policies suggest more people are putting plans in place, but the prevalence of coverage may mean too many people still have blind faith in the state.

To find out more about how The Exeter can help you put your clients’ income first, book a short webinar with one of our Adviser Account Managers at www.the-exeter.com