"There are many other forms of protection insurance, such as critical illness or life insurance that have their merits but by their nature would not cover a period away from work resulting from poor mental health."
According to the charity Mind, one in four people in the UK will suffer some kind of mental health problem during their lifetime, ranging from anxiety and depression to OCD, phobias and eating disorders. The Labour Force Survey shows that stress, depression and anxiety resulted in the loss of 9.9 million working days in 2014/2015. The average lost per case is put at 23 days.
Cirencester Friendly’s 2015 claims statistics support this, with mental health being the fifth most common reason for making a claim; ahead of cancer, chest and heart related issues. On top of this, for the last six years, mental health has been in the top five reasons for making a claim.
The legal minimum that employees who are off sick receive between four days and 28 weeks is £88.45 per week via Statutory Sick Pay which is paid by the employer. The self-employed do not have this safety net.
Beyond this there is Employment and Support Allowance, a 13 week assessment rate of £57.90 for under 25s and £73.10 for over 25s, and then either £102.15 or £109.30 per week depending on circumstances.
With the average full-time weekly gross earnings currently £502, both SSP and ESA would represent a significant reduction in take home pay for those workers who do not have any kind of safeguard in place. Additional financial difficulties at a time when there is already mental turmoil is unlikely to aid a speedy recovery!
Income protection insurance will help alleviate financial concerns, such as paying the rent or mortgage and allowing claimants to focus on getting better, without the risk of having to return to work too early.
There are many other forms of protection insurance, such as critical illness or life insurance that have their merits but by their nature would not cover a period away from work resulting from poor mental health.
The worrying truth is that according to the Association of British Insurers’ figures, just over three million people in the UK have income protection cover, compared with the 17.4m working households. This begs the ongoing question, why are more people not covering themselves against the unexpected?
Unfortunately there is a perception by some that claims will not be paid. Claims statistics, which many provider’s publish, show this not to be the case however. In 2014, 92.9% of individual income protection claims in the UK were paid. Advisers could use these figures to demonstrate that the overwhelming majority of claims are paid, whilst also examining the reasons why claims were declined to help ensure successful outcomes for their clients – something the consumer, adviser and provider all want.
There is also an ‘it won’t happen to me’ attitude which prevails among many people. However the numbers speak for themselves. Although most will not suffer a debilitating illness that requires a long-term absence from work, these things cannot be predicted and those who do not plan accordingly are playing Russian roulette with their finances.
This is a belief that income protection is wasted money if no claim is made. However, some contracts have additional benefits, such as a Holloway Contracts that share fund surpluses and provide a lump sum upon maturity. Advisers who remain unconvinced about the benefits of pure protection contracts should seek out USPs that may appeal more to their clients.
An income protection contract is designed to be there for a policy holder when they need it most. Mental health issues might go unseen visibly but are just as debilitating as physical conditions and it is high time they were treated with parity.
