It’s time to prioritise income protection

If you think back to the start of 2020, most people had never heard of ‘furlough’. But fast forward to today, and it’s a term everyone in the UK’s now probably familiar with.

When the UK government took unprecedented action to protect public health, it quickly set up its Coronavirus Job Retention Scheme, allowing employers to continue paying most of their employees’ wages while they were unable to work due to coronavirus restrictions. Sound familiar?

At its peak, the scheme helped support 8.9 million¹ people. That’s a lot of people who now have first-hand experience of the benefit of receiving most of their income while unable to work.

With this financial safety net from the government no longer available, are people more interested in how they’d survive financially if something more personal stopped them working?

It appears so — particularly during the pandemic, when the industry saw an increase in demand for income protection.

While it’s often overlooked in favour of lump sum options, such as life and/or critical illness protection, many people still fail to realise just how important and comprehensive income protection is.

If you consider critical illness protection which covers serious conditions like cancer, stroke or heart attack, income protection offers protection for all these conditions — and more! Think mental health conditions and joint problems, which often aren’t covered by the lump sum alternatives.

Importantly, although furlough sounds like IP, it’s not quite the same. The main difference being that with furlough, people were only protected against being unable to work due to coronavirus. Whereas with income protection, their income is protected if they can’t work due to any accident or illness (including coronavirus).

It’s more affordable than you might think

Income protection can be cost-effective too. Choosing income protection with a shorter benefit payment period, such as one or two years, instead of traditional full-term cover which pays out to the end of the policy term, can halve the cost of cover. While choosing longer deferred periods can also help improve affordability.

But your clients don’t have to choose between cover that pays a benefit for a shorter period and full-term cover – they can mix and match both to meet their individual needs. For example, they could opt for full-term income protection to cover their ongoing fixed costs, like mortgage/rent payments, energy and other household bills, while income protection with a shorter benefit payment period of say two years could be used to cover their lifestyle costs — helping you provide the right level of cover for your clients at an affordable price.

Income protection can also be easier for clients to relate to their everyday costs, and more cost-effective than lump sum alternatives. Again, helping you provide financial security in exactly the way your clients need it.

The Income Protection Task Force wants to help support the industry and increase awareness of the importance of income protection to ultimately help drive sales of this undersold benefit. Following last year’s successful introduction of Income Protection Awareness Week, this important industry event will return this year from 19^th to 23^rd September. Visit iptf.co.uk to find out more.

¹Coronavirus Job Retention Scheme: statistics, House of Commons Library, December 2021