Welcome to today’s blog, where we delve into a crucial aspect that every homeowner, and even those aspiring to be, should be well-versed in – Income Protection. In this writers opinion, having this safeguard in place is a necessity. Let’s explore the ins and outs of this policy, especially tailored for First-Time Buyers and home owners
Understanding Income Protection
Income protection is a policy that provides a consistent monthly stipend amount to give you an income if you are too unwell to work through an accident or illness in the event you’re unable to work due to an accident or illness, extending beyond the coverage provided by your workplace. Surprisingly affordable, especially for those without current medical conditions, this policy could cost as little as pet insurance, home insurance, or mobile phone cover.
Even if you’re not actively employed, your contributions to your household, as a student or homemaker, are invaluable. Income Protection insurance ensures you receive a monthly benefit, such as £1200pm, if you find yourself too unwell to work.
The Crucial Role of Income Protection in Financial Planning
While £1200 might not seem substantial initially, envision a scenario where you can no longer work either full-time or part-time in the long term. That seemingly modest amount can become an invaluable lifeline
For those on higher salaries it provides a percentage of your income which could result in much higher benefit claims of £3500 pm, £4000 pm or more.
Understanding the costs associated with Income Protection is vital. Some plans are as affordable as mobile phone insurance and can be tailored to fit your budget.
Lets say a first time buyer had an accident that meant they could no longer work, just as they were about to make that next step into home ownership. Rather than depleting their savings for the deposit whilst they recover, this policy helps them protect their savings. In longer term issue situations, Income protection benefit can be used towards mortgage applications for affordability assessment and is considered an ongoing sustainable income to allow you to borrow. It could also be used to cover additional support services that you may need such as physiotherapy or medications, or just to give you a lifestyle that would otherwise be on achievable with no income.
Navigating Complex Details with Evergreen Mortgages
There are more complex details about these policies that you should be aware of and Evergreen mortgages is here to help you navigate these finer points. We have more information on our site here: https://evergreen-mortgages.com/insurances/
Income Protection policies come with nuances, one of them being the deferred period – the duration you need to be off work and unwell before the policy activates. It ranges from one to twelve months based on your current work cover. Adjusting this period based on your savings and needs can reduce policy premiums.
Occupation Matters: Tailoring Policies to Your Profession
Your occupation plays a pivotal role in the type of policy you can secure and may suggest that particular companies may be better suited to your personal tailored policy.
For example, manual workers, such as builders or carpenters may need a cover that includes fracture cover, so that if you had a broken hand or leg you received a payment to support you. A broken bone, which may not prevent an office worker from completing their normal daily work, may be much more difficult on a building site, so fracture cover could be an important factor for you depending on your occupation
Earnings Proof and Company-Specific Details
When claiming, some companies require proof of earnings from the last three months, potentially causing issues for those with fluctuating incomes. Those which include commissions or overtime, freelances and those who are self-employed can all fall into this category.
Choosing policies that secure the claim amount at the time of application can provide peace of mind, reassuring you that the premiums that you’re paying will ultimately provide you with the cover expected.
Companies have different maximum benefit amounts, ensuring policies cater to individual financial situations.
Short-Term vs. Long-Term Income Protection: A Vital Consideration
Mortgage brokers can often suggest short-term Income Protection policies for cost-effectiveness. However, evaluating the marginal difference in premiums between short-term and long-term policies is crucial. A seemingly insignificant increase in premium for a long-term plan can provide years of additional security.
Additional Benefits: A Key Differentiator
When it comes to additional benefits, not all policies are created equal. They can include services such as physiotherapy which could help you to return to your normal lifestyle and work quicker. They can also include counselling services and annual health checks or access to remote GP services. Additional services could make a significant difference to your recovery time.
Real-Life Examples: Why Income Protection Matters
It’s hard to imagine when you’re healthy and well, have something like this could be Useful to you, however as a real life example, and with her permission I can tell you about my friend.
I have a friend who is a couple of years older than me. She has always been relatively well but was diagnosed with spinal fractures in her late 30s.This has had a devastatingly detrimental effect on her lifestyle and her physical abilities to work. She’s had to make adaptions to her lifestyle and to her home. All of these things have been managed in part through family support because she has now struggled with this for over five years.
Even the most generous employers normally only provide cover for 6 to 12 months. Many people will not have anything over and above statutory sick pay from their workplace, so you can see that somebody in this position could very quickly find they are completely reliant on the state and family support.
Whilst her family support is amazing; I know that for her, feeling she will be a burden on them for the rest of her life is a very difficult situation to be in and she does all she can to try to reduce that burden. Had she been aware of this type of policy and had something like this in place her situation now would be vastly improved.
There is a colleague of mine in the industry who has a close friend who, whilst on holiday abroad, had a tragic accident fell from the second floor balcony. He was paralyzed, and his entire life changed overnight. Financially, he had Income protection in place. The relief of this burden and pressure of finances is hard to imagine if you have not been in their situations.
These insurances are a safety net, providing first time buyers security over their deposit funds, new home owners cover for their new payments and commitments, and most importantly protection over our most important asset of all – Our ability to earn an income.
Secure Your Future with Evergreen Mortgages
As you embark on your homeownership journey, consider the essential cover of Income Protection. Contact Evergreen Mortgages today to find out what this essential cover would cost for you.
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