If money were no object, I would think it fair to assume that we would all have insurance coming out of our ears – life insurance, critical illness insurance, permanent disability insurance, accidental death cover, medical insurance, redundancy insurance, sickness insurance etc. etc.
However, if like many people it is hard to find the money to live day-to-day never mind spending money on the ‘what ifs’ and ‘tomorrows’, it’s important to prioritise. In this piece we will look at the very serious subject of the loss of income.
Risks to income
If you are currently employed, your income is at risk from both redundancy and illness. If you’re self-employed, the risk to your income is only illness.
The insurance company Friends Life conducted some consumer research recently which was shocking. According to the survey:
- 67% of Britons lose sleep over their future health
- 13% said that they would rely on family or friends for financial help if they were too ill to work
- But 64% said that they would not be able to help thier friends or family if they were asked
- One in five people said they had never considered what would happen if they became ill and were unable to work.
It seems pretty clear that people are worried about their health, but do not worry about the next step – i.e. what are the financial consequences of being ill?
Is redundancy cover more important?
The fear of redundancy is all too common, especially in this economic climate. However, if you are made redundant, it is possible/likely that you will find another job or some kind of income to tide you over in the short term.
If you are unable to work through illness, then there is nothing that you can do about it. If your illness is of a long-term nature – your income can be cut off permanently.
Emergency fund for redundancy
Bearing in mind that most redundancy policies only pay out for a maximum of 12 months – you could save yourself the monthly premiums, and instead build up an ‘emergency fund’ of three months’ salary – that should take away a lot of the worry.
Long-term Income Protection / Permanent Health Insurance
No-one can anticipate whether they are going to be ill, or how long for. Bearing this in mind, consider a Permanent Health Insurance Plan, which unlike its poorer cousin ASU Plan (Accident Sickness and Unemployment – which again only pays out a benefit for 12 months) would pay out a monthly benefit to you in the event of you being unable to work through illness, either until you had recovered, or until retirement.
So when considering what to insure, surely it is sensible to insure the things that are completely out of your control…?
Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to contact Henrietta, email us on [email protected] and we’ll put you in touch.