The financial impact of long-term sick leave
Mike Perry, CEO at PG Mutual, discusses the potential impact of long-term sick leave on your finances, and the cover you need to help you meet your financial commitments while you recover.
If we look back to the early 1900s, 75 per cent of the population had some form of income protection cover, in comparison to today's figure of just 15 per cent according to Money Facts March 2015.
This is a surprisingly low figure considering that, although we have a State safety net, the actual sum you would receive is only £88.45 per week for those employed (or just £73.10 for the self-employed).
With an average household weekly spend of £517.00, this wouldn't be nearly enough to keep on top of the bills. It seems the 'welfare state' is no longer a sustainable option for a person on long-term sick leave to be able to afford today's necessities.
In fact, a recent survey reported that despite a high level of some form of incapacity experienced by participants, there is a significant underestimation of the risk of incapacity, and a serious lack of financial protection for a large proportion of the UK workforce.
With so many negative outcomes, it is surprising that so few people have taken steps to protect their income.
Many insurance companies allow you to set the amount you want, or can afford to, pay. This dictates the level of cover you will receive, making it affordable. Insurance companies have been publishing their claims statistics for a number of years now and are keen to show their high rate of claims payments. Many achieve above 90 per cent year on year: PG Mutual paid 97 per cent of claims over the past three years.
So could the reason be as simple as we don't like to think of ourselves being seriously ill or having an accident?
One in six people look for incapacity protection once they have become ill or injured, which is, by this point, too late.
With a free healthcare system and an income support system, it appears that many believe that income protection isn't a necessity.
We are not talking about dining out, holidays or new clothes, but rather the fundamental household expenses – your mortgage, utility bills, insurances, food, mobile phone and broadband. We take these everyday essentials for granted because we are well and can pay for them - but what happens if you can't?
Research shows that one in four people would be in poverty if they were unable to work for more than a year, while the average person has enough savings to last them about two months if they lost their income. The solution to alleviate this concern is to take out an income protection policy. Which? Consumer website goes as far to say "The one protection policy every working adult in the UK does need is the very one most of us don't have – income protection".
About PG Mutual
PG Mutual are working with ICAS to provide access to exclusive income protection solutions for ICAS members. As a member of ICAS, you are entitled to a 20% discount off your first two years' cover.
Visit PG Mutual and enter discount code 'ICAS' to find out more. In addition, you will be entered into a prize draw to win £750 worth of holiday vouchers.