Do Young People Need Income Protection?
After a turbulent 24 months causing national financial instability for everyone. Many young people have been asking similar questions about Income Protection and the future. Including what would be the financial impact of not being able to work? Can I pay the bills and maintain a lifestyle for my Family and loved ones without my monthly income? How do I Compare Affordable Income Protection policies?
Over half of young people who are currently in employment, aged 16 – 25, could only cover their costs of living for approximately one month if they were unable to work. However, for many young adults, obtaining a protection policy is not a priority. The most common outlook from the 16-25 age group is that if you are fit and healthy with no children, why do you need Income Protection?
In today’s detailed guide for 2022 we explore why young people need Income Protection Insurance. Including how it can provide not just replacement earnings and financial stability but also instant peace of mind:
How Does An Income Protection Policy Work?
Do I Really Need Income Protection Cover?
Am I Too Young For Income Protection?
How Much Does An Income Protection Policy Cost?
Recent polls from The Money Helper website suggest that millennials (20 – 37 year olds) do not have the same levels of disposable income compared with other age groups. However, as detailed within our previous guides it is not the monthly premium cost that prevents younger or single people from taking out an Income Protection policy. The main response provided to the poll was that many fail to see the need for a policy as they may do not have a mortgage or young children.
Because accidents and Illnesses can impact anyone at any time and could mean a dramatic change to personal circumstances. A few very simple questions will help you to identify if you need Income protection. How would you cope financially without your monthly or weekly income? Could you still pay your rent, household bills or mortgage?
If you live independently and only rely on your income, you may struggle to meet living increasing cost of living. You may still live with parents or other members of the family, but what about the car loan and credit card bills?
According to The Money Helper website, ‘It doesn’t matter whether or not you have children or other dependents- if illness means you couldn’t pay the bills, you should consider income protection insurance.’
How Does An Income Protection Policy Work?
Income Protection Insurance (also known as permanent health insurance) is a long-term protection Insurance policy like Critical Illness Cover and Life Insurance. Due to a very common misconception many people confuse this type of cover with payment protection insurance (PPI). A payment protection policy only provides cover for very specific repayment commitments like credit cards. However, Income Protection replaces your income without the same restrictions.
An Income Protection policy replaces part of your monthly or weekly income, usually 50%-80%, if you are unable to work due to illness or disability. An important note is that Income Protection does not offer protection for redundancy.
A simple way to reduce the monthly premium cost of an Income Protection policy is to extend the waiting/deferment period until their sick pay ends. By increasing the waiting time will reduce the monthly premiums and the policy will pay out until you start working again, or retire, whichever is sooner.
Do I Really Need Income Protection Cover?
It is a very important question with many different things to consider before deciding if a policy is needed to protect your income. A few of the key point to consider are:
Company sick pay: Talk to your HR department and find out if you are entitled to it and how long would you be covered for. Typical company sick pay starts after a probationary period and you would then receive your normal rate of pay for a specified number of weeks.
Statutory sick pay: If you earn a minimum of £116 a week you may be entitled to £92.05 per week for up to 28 weeks. However, would this be enough to cover some of your monthly bills?
Rent or mortgage payments: If you own your own home, your mortgage repayments are more than likely your biggest outgoing. If you were no longer receiving a stable income because you were out of work due to illness or injury. You may risk losing your home if you cannot make the monthly mortgage repayments. If you are a either a private or council tenant, you must pay your rent or risk facing eviction.
Car loans: For many, a car provides independence and the opportunity to work further afield, but it can also mean expensive repayments. With the increasing cost of buying a new car increasing by 80%, many are financed by PCP schemes. Could you continue to afford monthly repayments with no income or the reduced income from statutory sick pay alone?
Credit cards: Many 18-25 year olds hold five times the unsecured debt of their older counterparts, and are increasingly becoming more concerned about their ability to repay their debts. Think about whether you could meet monthly card repayments if you weren’t able to work.
Am I Too Young For Income Protection?
The very simple answer is no, It is never too soon to protect your monthly/weekly income. The most common circumstances that people obtain an Income Protection policy is when they get a mortgage or start a young family. However, Income Protection is a sensible precaution for everyone who relies on their incomes, regardless of age or family circumstances.
It is also worth noting that Income protection is much cheaper than you think. Generally, the younger you take out an Income Protection policy, the cheaper your monthly premiums will be. Also, by choosing a deferment period to suit your individual circumstances will allow you to reduce the monthly premium cost even further.
How Much Does An Income Protection Policy Cost?
By searching and comparing polices from all of the UK protection providers, you can get cheap effective Income Protection starting from just £5 per month. The premium costs will vary depending on the amount you are protecting, some policies can cost in excess of £100 per month. Trying to calculate the policy cost can be complex, and different underwriters use numerous factors to produce a quote.
Things that will impact your monthly premium cost:
The deferment period before a pay-out
The level of cover
Pre-existing medical conditions
Length of cover needed
Your age
If you are a current or former smoker
Should I Use An Insurance Broker To Find The Best Policy?
When making the important decision to purchase your Income Protection policy, you can either buy directly from an Insurance provider or through a broker. There are many different reasons and benefits to use the latter rather than approaching a provider directly.
FCA regulated brokers, like Protect Income Insurance are not tied to only one provider and are free to compare Income protection quotes from all the UK Insurance companies. This allows you to get Income Protection quotes from all of the different providers and find the policy that best suits your individual circumstance. By matching your individual needs, budget and ensure that you have the best policy at a competitive premium will provide financial security for the future.
Because Protect Income Insurance is an independent FCA regulated broker, our expert team of specialists has the experience and the right knowledge to help you find the best Income Protection available for you and your loved ones. Compare Affordable Income Protection today to find the protection you need.
Compare Income Protection Quotes
As detailed above, there are many different types of young people who would benefit from having an Income Protection policy in place. So, which would you choose to insure first? A car, pet, phone or gadget or yourself and your income to provide financial stability for the future?
As an FCA regulated broker with a team of experts. We search and Compare Income Protection Quotes from all of the providers in the UK. We can help you to obtain a personalised policy at the best possible price for the future.
Comparing Income Protection Quotes and applying for cover is quick and easy. Just complete one simple online form and we’ll do the rest. By protecting yourself with a policy can offer financial security for the future for you family and loved ones.