Many people are currently finding themselves with something they have not had for a long while – the gift of time.
It is only natural to take stock at the moment, but have you considered taking care of some important life admin? One of the things these unprecedented times have taught us is that it is crucial to be adequately covered for unexpected eventualities.
In sickness and in health, bills still need to be paid and loved ones protected – we all need to plan for the good as well as bad. What you get in return is peace of mind, a valuable gift at any time.
How best to go about it? Here are some of the questions that you should be asking yourself.
What if I can no longer work?
As you are employed by the NHS you will be entitled to sick pay from your employer. This is based on your length of service and the table below shows your entitlement:
|Length of Service||First Period||Subsequent Period|
|During first 4 months||1 month’s full pay||nil|
|From month 4 to 1 year||1 month’s full pay||2 months’ half pay|
|During 2nd year||2 month’s full pay||2 months’ half pay|
|During 3rd year||4 month’s full pay||4 months’ half pay|
|During 4th and 5th year||5 month’s full pay||5 months’ half pay|
|After completing 5 years||6 month’s full pay||6 months’ half pay|
After these timescales if you are still unable to work, your income will cease, and you may no longer be able to earn an income. This is where an income protection plan is invaluable as it is designed to provide a replacement monthly income if you are unable to work due to an accident or illness. This income starts after a set period (known as the deferred period) and continues until – you can return to work, the plan expires (often linked to retirement age) or on death.
This type of cover allows you to continue to meet your household bills, which can include mortgage payments, food, council tax, utilities, and school fees.
For a plan to be suitable it will need to have a deferred period that dovetails in with the above entitlement. For example if you have been working for the NHS continuously for over 5 years, you will not need any cover for the first 6 months as you will still be receiving full pay, however you will then need partial cover to top-up the half pay for 6 months and then a greater level of cover from 12 months onwards.
Income Protection can be one of the most important types of insurance you can have, because maintaining income is so crucial to maintain your standard of living.
What happens if I have a more serious illness?
Many people have life insurance, which in the event of death pays out a lump sum. However, contracting a serious/critical illness can also have a huge impact on your financial wellbeing – common illnesses such as a heart attack, cancer, and strokes. Being able to access a lump sum, should you find yourself facing illness, can remove a great deal of the financial stress, especially when twinned with income protection cover.
For example, the income protection plan can hopefully maintain a suitable level of income, while the critical illness plan can provide a lump sum which can be used to repay the mortgage. This means should you recover and can go back to work, the income protection plan will stop, but as you no longer have a mortgage, you can afford to return to work on a reduced basis if necessary.
There may also be some occasions when you have a serious/critical illness, but you are not eligible to claim on an income protection plan, for example if you are able to return to work before the end of the deferred period. Therefore, this makes having both types of cover more important.
Lastly this type of plan is not just to cover your mortgage. You may want additional cover to support your wellbeing, such as paying for private healthcare or if you need to make alterations to your house due to reduced mobility.
What happens if I die?
Life insurance is probably the most common form of health-related insurance and important for anybody who has any form of debt (i.e. a mortgage) and financial dependents.
The emotional stress that comes from the death of a loved one is immeasurable, but anything that can reduce financial concerns removes some of this stress for your family.
The starting position for this is normally making sure that any mortgage is covered, so your remaining family have the security of somewhere to live. Importantly the cover does not have to stop there, because a mortgage payment is only one of many bills that must be met.
Looking at cover beyond the outstanding mortgage may be important to replace any lost income and to make sure those left behind have a standard of living you would be happy with. Again, this could be especially important if you have school fees, so the education of your children is not affected.
Lastly how can we help?
There is a vast array of plans available, with numerous options, so it is important you take advice, so that any cover is tailored to your circumstances. This will factor in, for example, what other income you would still have coming into the household and what existing cover you may have, including cover offered by the NHS pension scheme. You do not want to be under-insured, but at the same time you do not want to be over-insured.
We are here to help, advise and simplify the process. Please get in touch and we can discuss suitable options and hopefully offer peace of mind. If you have existing cover, you may also discover whether you are paying too much.
Please contact me on firstname.lastname@example.org, through Twitter at @FinAdvMark or LinkedIn