Kara Gammell: The importance of cover for women

Ask any parent about how we protect our children and we’ll spout all the ways that we try our best to keep them safe: car seats, vaccinations, teaching road safety, chopping up grapes – the list is endless.

But how many mothers have taken steps to protect themselves? Sure, we wear our sun cream, fasten our seatbelt and have stubbed out the cigarettes a long time ago – all often motivated by the sudden sense of responsibility that sets in once your first child is born. After all, we need to make sure that we are doing our best to ensure that we are around for as long as possible for our little ones, right?

But, it seems that many women – those without children included – are overlooking one of the biggest things you can do to protect your family: insuring your income should you become too ill to work.

Figures from Aegon, the insurer, revealed just how many women this affects: almost half of all working women in the UK do not have any form of protection in place to replace their income if they became seriously injured or ill or passed away.

Income protection policies are designed to cover you in times of hardship and to make sure there is enough money available to keep food on your table and a roof over your head.

Most people dramatically overestimate the amount of state aid we would receive if we get signed off work long term: we will only be entitled to is maximum of just £145 a week in Personal Independence Payment benefits. Not exactly enough to cover all your expenses, now is it?

To make matters worse, this protection gap is only going to continue to grow as more women are working than ever before. Official figures show that the number of women aged 16 to 64 in employment has continued to rise over the past 40 years, while the percentage of men in the same bracket has fallen.

What’s more, a growing number of women are the breadwinners in their household – 51 per cent according to Aegon stats – and more of us are launching our own businesses and going freelance, so protecting our income is more important than ever as there is no workplace scheme available to tide us over temporarily.

So despite the increasing numbers of women who continue to contribute to the UK labour market, and we are evidently still failing to view – and, more importantly, protect – ourselves as key earners within our UK household.

It’s not uncommon in this day and age for both genders under one roof to be contributing either partially or wholly to the costs involved in living there, yet we women are underinsured relative to men. Figures from comparison website and protection broker ActiveQuote show that enquiries about life insurance are split fairly evenly in gender terms, at around 48 per cent women to 52 per cent men. This is often thanks to the many banks requiring this type of cover when agreeing a mortgage.

However, there is a big difference in relation to income protection, at around 35 per cent women to 65 per cent men.

This suggests that this type of cover is still seen as more of a priority for men in employment than it is for us, even though the need for women to protect themselves is just pressing as it is for men.

Just look at the top two reasons for claims – mental health conditions and back injuries – neither of these are male-specific health problems, yet fewer women are insured.

WHAT ARE WE WORTH

To add insult to injury, many women, especially those of us who are mothers, underestimate our financial value of their role within the household. Figures from Scottish Widows shows that almost a quarter of women admit that the reason that they’ve not taken out life insurance is because it’s not a financial priority or they don’t think they need it.

However, it seems that women are less likely to take out income protection than men due to a traditional mindset, where men are perceived to be the main breadwinners and women’s income is regarded as less important.

But even in a two-income family, the loss of either parent would have extremely serious implications. Parents depend on each other in all sorts of ways that go beyond earning an income and paying the bills.

In many cases, the surviving parent would have to leave their full-time job to care for the kids. Or if they choose to continue to work, the extra childcare needed would become very expensive. According to the latest CORAM Family and Childcare survey, the monthly cost of full time nursery care for a child under the age of two in England is £1,065 and £1,040 a month for a 2 to 3-year old.

“The financial pressure on people with young families is immense,” said Becky O’Connor, personal finance specialist for Royal London.

“Paying for childcare puts parents at real risk of financial hardship. With housing and other living costs being high relative to income, there isn’t the breathing room for one parent to be off work.”

To add insult to injury, according to ONS data, on average, women do 26 hours a week of such unpaid work, compared with the 16 hours completed by men.

In fact, we do so much unpaid work that if it were paid, it would account for between 10% and 39% of GDP.

If you are in any doubt of the amount of unpaid work that you are contributing to your household, the Office for National Statistics has a handy calculator that will show you just what your efforts are worth. Check it out, the results may surprise you: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/womenshouldertheresponsibilityofunpaidwork/2016-11-10

Now, how would you cover the costs to hire someone if you were unable to do those chores, childcare and cooking?

But it is not just costs that are causing many women to go uninsured. Time is an issue as well.

At my six-year-old’s swimming lesson last week, my mum friends – only one of one of whom had income protection – told me that time was also a barrier for taking out proper financial cover.

They told me that they are so short of time thanks to juggling a job, childcare and running a household, that by the time that they sit down to think about financial protection, it is very late into the evening and too late to take action as most providers are closed.

Luckily, there are options for women to arrange cover at a flexible time with many brokers offering an online contact form and evening appointments with adviser.

Lifesearch’s Emma Walker explained: “Our advisers work from 8am to 8pm – with plenty staying later if someone needed to speak just after 8pm, and our Tele-Interview team work up to 9pm Monday to Thursday to get those applications completed.

“We are open 7 days a week to offer as much flexibility for the families we protect. We will always be flexible beyond this if anyone needed something different.”

HOW MUCH COVER DO YOU NEED?

So how can you ensure you are properly protected should you find yourself out of work due to an accident or sickness? How much cover is enough? And how much is it going to set you back each month?

A good rule of thumb should be enough to pay any bills and provide money so your family will be financially secure.

Like any insurance, it is crucial that you shop around before you purchase a policy. Never assume that your bank or broker will offer you the best deal as many are usually tied to just one provider and can be very expensive.

Policies are priced according to your age, general health and the amount you want to receive if you must make a claim. When calculating how much cover you need, it makes financial sense to consider all the monthly outgoings you pay every month.

As well as your mortgage, rent or loan commitments, you must include those everyday essentials such as council tax, utility bills and the weekly food shop. Fail to do so and you could still end up in debt trying to meet your other commitments.

Also bear in mind that we are all living longer so it is crucial to think past traditional retirement age or your mortgage term when taking out a protection policy to ensure that you don’t come up short.

It is also worth considering the changing state pension age as it increases for both men and women to 66 by October 2020. It will rise again to 67 between 2026 and 2028.

The good news is that it is not going to break the bank. A 35-year-old looking for income protection of £1,500 a month can expect monthly premiums of £26.79 with Legal & General.

It may be tempting to opt for a critical illness policy instead of income protection in a bid to cut costs, but be careful.

While these types of insurance policies complement each other, they do different things and cover different risks so it is important to carefully consider both before making a purchase. If you have a heart attack, for instance, and return to work after six months, a critical illness policy would have paid the lump sum, where income protection payments would stop when you go back to work – if you go back at all.

During a trip to the beach on the weekend, one friend of mine said that her bank advised her that this would be enough because she didn’t have kids. When I asked her how she would pay her bills when the lump sum was gone, thankfully the penny dropped.

TIPS TO BRING DOWN PREMIUMS WITHOUT SCRIMPING ON COVER

The good news is that as with any financial product, whether your mobile phone contract or your home insurance, there are ways to bring down costs, without compromising on the level of cover.

Always choose a policy that insures your “own occupation” – so, if you are unable to do your own job – rather than any work at all because they fall ill, you will still get a payout.

Luckily, this type of cover, while offering better protection, may not be costlier as it is factors such as age, smoking, occupation, length of policy and amount of cover that determines the premium.

Get the most for your premiums and opt for two single policies rather than joint cover if you are in a relationship. Despite higher premiums of roughly 10%, these two policies can pay out twice, whereas a joint policy will only ever pay out once.

The benefit is that you will get double the amount of cover you would receive from a joint policy and if anything happened to both lives, both policies would pay out, providing double the payout for a similar premium.

Be completely honest in your answers to all the questions on the application, for example your medical history, otherwise the policy could be worthless.

You might feel that you are over sharing, but if you hold something back it could really affect whether the insurer pay out in the event of a claim.

This item can contribute towards your unstructured IDD CPD requirement.