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“Protect your income to bridge the gap until retirement”

06 September 2016

Gocompare.com comments on figures from the TUC

Matt Sanders, head of money at Gocompare.com, comments on the figures released by the TUC this week which show that one in eight people are forced to stop working before they are eligible for the state pension due to poor health:

"Dealing with ill-health is difficult enough by itself, but can be compounded by any financial troubles that follow as a result of a loss of income. While some people may have enough money saved to see them through until their state pension age, or may benefit from a generous company sick pay policy or could get by on Government benefits, for many others it would be difficult to meet everyday costs.

“Income protection insurance can help relieve the financial pressures placed on people and their families should the policyholder be unable to work because of an accident, illness, and in some cases due to involuntary redundancy.

“The cover can vary greatly from one policy to the next, so it’s important to shop around carefully to determine what’s most suitable for your specific circumstances, but a good policy should enable you to bridge the gap until you are able to return to work or are eligible for your pension.

"You can then tailor the benefits and costs to your own personal situation. One way of keeping the costs down is to opt for a longer deferred period. If you have other potential sources of income in the event of not being able to work, such as company sick pay, you could defer any benefit from an income protection policy for longer. A policy with a waiting period of 52 weeks would be a lot cheaper than one with four weeks.

“What’s best for you will depend on the size and type of your financial responsibilities, your dependents, and how much of your salaried income you can substitute with other sources, so weigh up the options carefully.”

“Income protection policies pay out a regular amount and can often be claimed against multiple times, whereas life insurance and critical illness cover policies make a one-off lump-sum payment on death or diagnosis of a qualifying illness.

“Some people opt to have income protection as well as life and critical illness cover, and while this should offer financial protection against most eventualities, it could cost a lot of money to have this much insurance.

For more information, read Gocompare.com’s guides to life insurance, critical illness cover, and income protection.

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