Income Protection

Article published on 13th August 2008

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You are enjoying life, everything is ticking along nicely and wham! An accident/illness or even redundancy knocks your world into a spiralling downturn. It doesn?t even need to be life threatening. Any threat to your health/financial stability affects you in ways you don?t imagine until it happens!!

In 2001, there were 7.4 million households in England and Wales with one or more persons with a limiting long term illness (source:statistics.gov.uk/STATBASE).

Employees may be lucky enough to receive either all or a percentage of their normal salary for a limited period. This however, is becoming more the exception than the rule. There is no possibility of this cushion for anyone who is self employed.

Legally, employers are obliged to pay most employees who are absent from work due to sickness for at least 4 consecutive days and earning an average of ?90 per week before deduction of tax and national insurance, Statutory Sick Pay (SSP) for up to 28 weeks. The standard weekly rate of SSP is ?75.40 from 6 April 2008 to 5 April 2009 which will very likely be less than your full earnings.

Income Protection policies can prove invaluable, and unlike life insurance, pay out when you need it, usually providing a maximum of 50-65% of gross earnings. Premiums will be dependant on age, gender, health, lifestyle, hobbies and the period before which you can claim from your policy (known as "waiting period").

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