Your ability to work is a vital resource. It allows you to keep a roof over your head and feed and clothe yourself and your family. Financial hardship can occur as a result of your inability to work for a significant period.
We tend to think of cancer and heart attacks as the main health threats, but the most common causes of long-term disability are stress-related issues and muscular-skeletal problems. This is not to minimise the suffering caused by conditions like cancer, but to recognise the economic reality of the threat to your income.
It is easy to undervalue your income. In terms of total sums at risk, the numbers can be very large and far exceed the lump sums you may arrange in a life insurance policy.
It does not take long to work out your total monthly expenditure obligations, such as mortgage repayments and bills for household essentials. How long could these be paid from your savings?
Income protection benefits are currently tax free. However, such cover can be expensive so it makes sense to at least arrange sufficient income to cover your monthly expenditure obligation.
The monthly benefit from an income protection policy may affect your claim to some means-tested state benefits. Whilst the state has a role in looking after those who suffer from a prolonged disability, this is very limited. So a little planning ahead could make a big difference. Let us know if you'd like to discuss your options.
Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
