When did you last review the details of the most important aspect of your financial planning? Whilst your pension, life assurance and even your Will are of course important, in many cases I don’t view them as important as income protection.
STOP! Before you think, ‘I’m sorted, I don’t need to read on’, consider these 4 crucial questions.
First, a quick reminder of what income protection is. Income protection looks to provide you with an income if you’re unable to work through sickness or illness. Most of us need our income in order to live, as do those who are financially dependent on us. Of all the things to insure, this basic requirement in life is arguably the most important.
Question 1: Has your income changed since you took income protection out?
Your income protection contract should be index linked. It is highly likely that either the benefits under the contract or your income has risen since you arranged your income protection, meaning the two are out of kilter.
This could lead to you being under or over insured. It’s worth checking…otherwise what you actually get when you desperately need the income could well be quite different to what you were expecting.
Question 2: Will you need to work past age 60?
The NHS is changing the point at which you can start to draw your NHS Pension. Historically, income protection contracts were written to age 60, in line with the normal retirement age (NRA) for the NHS or that being the point most people typically wanted to retire.
If your financial commitments mean you’ll need to work past 60, it would be wise to review your income protection cover now.
Question 3: Have you reviewed your income protection cover since insurance industry-wide changes took place in January 2013?
The Gender Equalisation EU directive was introduced in December 2012 to stop companies using gender as a basis on which to differentiate on price. It has meant, for one, that the price for female income protection has dropped substantially.
If you haven’t reviewed your income protection cover since January 2013, it may now be possible to get the same cover at a lower cost. It’s worth checking at least.
Question 4: Is there a new product with even better cover more suitable for you?
In recent years there have been beneficial improvements to income protection contracts. For example, a couple of years ago, one of the major players in the medical insurance field launched the best contract that we have seen.
For some of our clients, it’s been worth them reapplying for the same cover in order to benefit from the enhanced contract.
The last word
You could view income protection as a waste of money and, indeed, we hope it is for you…we hope you’ll never need to draw on it. Should that not be the case and you do need to make a claim at any point in your career, it will be the best money you’ve ever spent!
Which, if any, of the above questions apply to you? Have they instigated you to review your income protection cover? Let us know below