Retirement is traditionally seen as a time to relax and enjoy the rewards of your lifetime of hard work. That’s why it’s important to ensure that nothing impacts your progress towards this goal.
For example, have you ever thought about the financial implications of being unable to work for a period of time?
According to data from the Health and Safety Executive (HSE), almost 700,000 Brits suffered a workplace accident or injury in the 2019/20 year. If you’re one of them, and you need to take time off to recover, it could have a significant impact on your progress towards your financial goals.
Thankfully, there is something that you can do if this prospect concerns you. Read on to find out about the benefits of income protection and how it can help you to reach your retirement goals.
A serious workplace injury could take several weeks or months of recovery
Income protection covers a wide variety of illnesses and accidents but one of the most common reasons for making a claim is workplace injury.
As careful as we might try to be, every year thousands of Brits are injured while at work. According to figures from the HSE, the most common reasons for accidents were:
- Trips and falls on the same level
- Handling, lifting, and carrying
- Struck by a workplace object
- Acts of violence
- Falls from a height.
While a large portion of these injuries are only minor, such as falls, some are much more serious.
If you have a musculoskeletal injury, for example, such as a broken bone or torn tendon, you may need to take a significant time off work to recover. According to the HSE, these injuries account for almost a third of work-related ill health and were the cause of 8.9 million lost workdays in 2019/20.
If you suffered a workplace injury like this, you may be off work for a significant period of time. If you were, have you ever thought about how it would impact your finances?
Being unable to work may mean you have to dip into your savings
When you experience an injury or accident, it’s understandable that you might need to take time off to recover, but if your recovery takes longer than you expected then you might run into financial complications.
For example, if a broken arm leaves you unable to do your job, then you’ll probably need to take a period of extended leave. In this case, your income may be affected, and this can have a knock-on effect for your finances.
While you probably have an emergency fund in place, it may not last forever. Furthermore, while you can claim up to 28 weeks of Statutory Sick Pay if you’re too ill to work, you can only claim a maximum of £96.35 per week.
If you have ongoing financial obligations, such as a mortgage or school fees for your children, this is unlikely to be enough to live on. As a result, you may be forced to eat into your savings in order to make ends meet, or even rely on expensive credit.
Not only would this set you back in your progress towards your financial goals, but you would also probably be unable to keep making pension contributions.
While you may not think that a short break will make much difference in the long run, due to the effects of compound interest, even taking a year’s break can have a big impact on the size of your pension. This is particularly true for younger workers, as that lost amount would have had considerable time to grow.
When you come to draw your pensions, the absence of this money might mean that you have to reassess the lifestyle you enjoy in retirement.
Income protection pays you a portion of your salary if you’re unable to work
If you want to ensure that an accident or illness doesn’t impact your progress towards your retirement goals, one of the best things you can do is to take out income protection. This can help you to rest easy knowing that you have a safety net, even if the unexpected should happen.
If you fall ill or suffer an accident that leaves you unable to work, income protection will pay you a portion of your salary while you recover. This typically ranges between 50% and 70%, depending on the terms of your policy.
It usually pays out after an “excess period” of several weeks, with longer excess periods having cheaper premiums.
For example, having a four-week excess period means that you’d start receiving payments as soon as four weeks after you make a claim. However, this may be more expensive than a plan that is only paid out after a period of 12 weeks.
How expensive your premiums will be is typically determined by factors such as:
- Your age
- Your medical record
- How risky your job is
- How much of your salary you want to cover
- How soon you want the policy to pay out.
However, it’s important to bear in mind that many income protection policies don’t cover every illness. Furthermore, you may not be covered for a pre-existing illness.
These policies also don’t typically have any cash in value and cover will cease at the end of your term, or if you fail to keep up with your premiums.
Having protection in place can be a great way to gain more peace of mind, allowing you to rest easy knowing that illness or accident won’t disrupt your progress towards a comfortable retirement.
Get in touch
If you want to know more about how income protection can help you, get in touch. Please email info@investmentsense.co.uk or call 0115 933 8433.
