Responsible Adulting In The Time of Lockdown


This post is in collaboration

So here we are. Kinda out of lockdown but still in it at the same time. Remember when we went in around the middle of March and we all wondered how we were going to get through those initial three weeks and now it’s nearly August! Not much has changed for us since those early days although I think we both feel more settled – I’m still self-employed and Pete is still working from home with no plans to return to the office as yet.

This unpredictability though and dramatic change in not just our situation, but seeing what so many other people are going through, has really got us thinking about everything from wills, changing up our energy providers to save money and all of those dull but important adult things. We’re a bit chalk and cheese in many regards, Pete is very much the sensible, risk-averse one and I’m the flighty optimistic one that never thinks the worst will happen.

But even I need to be sensible every once in a while and realise that a lot has changed about my circumstances since swapping the security of full-time work with pensions and benefits, to the self-employed one. It makes things like Income Protection ever more important, especially in a global pandemic and now that I have a chronic illness, too. In general, you’re more likely to be off work sick than you are to pass away before retirement, so it becomes the most essential cover you should be looking into.

Needless to say, Pete has Income Protection insurance, in fact we joke that he’s insured his insurances. He says it helps him sleep at night because if you’re sick or injured, Income Protection will enable you to pay your bills and provide for you and your loved ones. Where state benefits can and do change inline with government policy, this cover is a contract and a promise to you that won’t change.

Whilst you may receive sick pay from your employer, not everybody does and some people overestimate how much they get. Income Protection can provide that financial safety net. You can choose a policy built around your own circumstances and you can cover as much of your income as possible or just protect your mortgage or rent repayments. It’s up to you how long your plan stays in place and how long each claim pays out for and a good adviser will be able to guide you through your options.  

Finding yourself unable to work because of illness or injury can be financially devastating, especially if you’re the main breadwinner in your household. According to the ABI (Association of British Insurers) one million workers a year find themselves unable to work due to a serious injury or illness. Income Protection is there to pay out in case something happens to you. It will usually provide between 50% and 70% of your salary until 1 of 3 things happen; you recover and go back to work, you reach state pension age and retire, or you pass away during the period of the claim.

The cost of Income Protection depends on your lifestyle, age, job, hobbies, your current health, your medical history and the level of coverage that you’d like. You’ll also need to decide on a ‘deferral period’ which is how long it’ll take between you making the claim and beginning to receive your payout. The longer your deferral period is, the cheaper your premiums will be. Before buying your policy, you should determine how much Statutory Sick Pay (SSP) you’re eligible for from your current job and establish how long you could get by for with just that pay and/or your savings. Then you can arrange your insurance payout to start at the point that you think you may need it.

Income Protection for the self-employed

Imagine you become seriously ill or injured and can’t go out to work anymore. You’re self-employed with a mortgage and a family and you don’t have a significant amount of money in the bank to fall back on. How are you going to pay your bills, run your business and put food on the table? Arguably, if you’re self-employed then you probably need income protection more than anyone (hint, hint Lins). Last year I spent a month almost bedridden after being diagnosed with Ulcerative Colitis and I’m fortunate that I work from home anyway but if it had been anything else it would have been even more debilitating.

Without the safety net of Income Protection, you’d have to pin your hopes on qualifying for Employment and Support Allowance which is financial support from the government if you’re unable to work due to illness or disability. And although that option is available, you’ll be provided with much more money if you claim on an Income Protection policy.

If you’re self employed then it’s all on you. No sick pay, no maternity leave and no pension. Income Protection is designed to replace your income if you were to become seriously ill or injured. It usually pays a percentage of your normal salary – usually between 50% and 70% – and the cost of a policy depends on your age, job, your health and lifestyle and the percentage of income you’d like to cover. When taking out Income Protection, you’ll agree to the range of illnesses and injuries covered – typically including heart disease, back issues, cancer and more – along with the ‘deferral’ period.

When self-employed, Income Protection should be factored in as part of your business plan so that you and your family can still get by without your income. When you take out an Income Protection policy, your monthly income is based on your share of the pre-tax profits generated by your business. The amount of cover that you’ll need depends on the size of your mortgage and whether you have taken out any loans to build up the business.

Income Protection is available to self-employed, primary carers, part-time workers, contractors and more. Even if you have some difficulty proving your income, there are plenty of options available. Unlike with life insurance, it really doesn’t matter if you have children or a family to protect when it comes to Income Protection. If illness means that you can’t pay the bills – dependents or no dependents – you should definitely consider this insurance. I hope this has been helpful, I don’t like to get all preachy but these past few months have definitely been driving me to get my house in order for sure!

This post is in collaboration

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