UK households are risking significant hardship through loss of earnings due to serious illness.
New research by the Centre for Economic and Social Inclusion has highlighted worrying figures about the number of UK households that do not have insurance in place to protect income against the risk of serious illness or injury.
Income protection insurance, which pays a percentage of your lost earnings as a tax-free monthly income for a set period of time, or for as long as you cannot work, is the most underused insurance relative to need. It can be an unnerving consideration and evidently many people prefer to believe that it won’t happen to them.
The findings, shared in a new report by the Association of British Insurers*, reveal how many working households do not have an “income safety net” in place to cope with a sudden loss of income when an earner becomes unable to work for more than a few weeks due to a serious illness or injury.
Around 250,000 people, or 1% of the workforce, leave employment each year due to ill health; 60% of these are the main household earner.
More than 60% of working families – 10.8 million households – would see their income fall by more than one third if the main earner had to stop work due to ill health.
Of these, 6.6 million households – about 40% of working families – would see their income fall by more than half.
Not only do these households not have the necessary insurance in place, but the problem is worsened by the fact that they get very little support from the state.
It’s clear that more people need to consider the comparison between the costs of having income protection insurance and not needing it, and needing it but not having it. Good health is our most precious asset; we should use it today while we can to put a complete protection programme in place.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
* ‘Welfare Reform for the 21st Century’, September 2014