We never know what’s around the corner, we certainly didn’t foresee this current economic lockdown. It’s not healthy to worry about everything that could go wrong in life, but it’s sensible to have safeguards in case they do.
For instance, it’s pretty unlikely your house will burn down, but the consequences if it happens could be disastrous, so you take out house insurance. In the same way, if you’re wise, you’ll be putting money away for your retirement, but what happens if, for some reason, you have to stop working and therefore earning? If you’re under 55, you can’t draw from your pension, so what will you and your family live on?
Is it time to make a considered decision to protect your income? Maybe you’ve just signed up for a mortgage; maybe financial responsibilities are solely down to you?
For younger savers, those who are some years away from retirement, we advise them to look at income protection insurance. This is particularly important if they have children who are still dependent on them.
Let us give you an example of real-life scenario, in which we have changed the name of the client: Richard Longford, in good health, married and with two young children. Richard set up an income protection policy in 2000, paying a monthly premium of nearly £11. Three years later, after a pay rise, he took out an additional second policy with a monthly premium of £13. As permanent health insurance is capped as a percentage of earnings, it can be cheaper to take out an additional policy. Additionally, this was set-up to pay the premiums through Richard’s business and is classified as a business expense.
In 2014, when Richard was in his mid-50s, he had an accident and suffered a serious head injury and is unlikely to be able to work again. At Reeves, we learned of Richard’s situation in December of that year and immediately offered to help and began to look at whether a claim was possible under the income protection policy.
Following Reeves involvement, the insurance provider accepted the claim and agreed to date payments back to the time of the original claim. Now Richard receives more than £900 a month under the two policies and this will continue for the next ten years.
If taking out an income protection insurance policy, Reeves will work with you to determine the level of income your family would need in the event of you being unable to work. Call us during this time of lockdown to get these ‘to do’ jobs done.
For younger savers with families or, clients who have the main financial responsibility of their household, this is a major consideration for your financial planning and Reeves will be happy to advise. Insurance doesn’t stop bad things happening, but it can help cushion the blow.
These articles are for information only. These articles are based on specific clients and their situation may be different from yours. No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.