The May 2024 report from the Office of National Statistics emphasizing the impact of long-term sickness should come as a significant warning to all of us (1).

More than 1 in 16 people are now inactive due to long term sickness (2). There were over 710,000 more people on long-term sick leave in the UK in April 2024 than there were in January 2021 at the height of the Covid epidemic (3). The top causes of absenteeism were anxiety, stress and psychiatric conditions (4) highlighting just how possible the predicament of long-term absenteeism from a mental health condition alone could happen to any one of us – of any age or walk of life.

Of course, much is written about why this might be the case and what society could do to get this genie back in the bottle, but one of the most pressing issues is how we can protect ourselves and our workforces from the financial impact of long-term sickness.

The financial impact

One of the most significant consequences of long-term sickness is the impact on our income and financial wellbeing.

Often, ‘sick pay’ from employers does not provide cover for long and available state benefits are often insufficient to cover even our basic out-goings. Looking to a spouse or family member to help financially during this time seems to be a natural response, as well as dipping into our savings, but realistically how sustainable would that be and how long would it last?

More people are taking out Income Protection insurance

It is no surprise that more and more people are now turning to Income Protection insurance to protect themselves financially should they need to be off work for illness or injury. In fact, new income protection policy sales last year increased by 16% compared with 2022 and is at its highest level since records started in 2000 (5).

Personal financial insurances

It is perhaps worth describing at this point some of the more commonly taken personal insurances, as there seems to be a great deal of confusion about what each of these cover us for. Many insurances, come with all sorts of additional elements and different bells and whistles, but here are the basics:

Life Assurance financially protects a customer’s next of kin should they die.
Critical Illness Insurance is there to help cope with the financial costs of critical, potentially life changing, conditions.
Private Medical Insurance is designed to give customers access to private medical services and treatment.

Whilst these higher profile insurances can be valuable during periods of ill health, people do tend to overlook one of the biggest and increasingly likely threat of ill health they are likely to face and the loss of their income if they cannot work.

So what is Income Protection?

Income protection is an insurance policy that provides you with a replacement income if you are unable to work due to an accident or illness. It can keep you going financially over periods spent out of work, potentially until your retirement years.

It can cover you for a broad range of illness and injuries even those that could potentially leave you out of work for shorter rather than extended periods of time including more common ailments such as flu, gastroenteritis or sprains, for example.

With an Income Protection plan you can opt for long-term cover so your payments will continue up until a specific age, usually retirement, or are well enough to go back to work. Alternatively you can opt for a short-term policy (usually 5 years or less) which will stop paying out when that term is over no matter if you are still off work or not.

The amount of your cover will normally be driven by your budget, but typically you can insure between 50% and 70% of your normal income. Some Income Protection companies will provide you with tools to calculate your necessary outgoings as well as the maximum cover you could be entitled to, so you can be sure your replacement income will suit your needs.

It’s worth highlighting too that under current legislation, if you pay for your own Income Protection policy any benefits you receive are normally free of income and capital gains taxes.

Why is Income Protection so important?

Income Protection helps you maintain financial stability in the event of unexpected life events, such as an illness, injury, or disability that may prevent you from working and earning your income. It provides you with financial protection.

To give you some real examples (although names have been changed):

Back in 2017 a stable wall fell upon Dave while he was treating a sick horse causing him extensive injuries. Dave had to be off work for 2 years. Over those 2 years, with an Income Protection Plus Plan he was paid 100% of his covered income which meant he could maintain his lifestyle and pay his bills, enabling him to concentrate on his recovery. He was also supported with a specialist rehabilitation programme to help get him back to work, at no additional cost. Dave is now back at the job he loves and continuing his career.

Bijal had been working as a GP, both privately and for the NHS. He was in his mid-thirties and his wife was expecting a baby when he was diagnosed with a progressive neurological disorder which slowly reduced his ability to work, before having to stop working entirely. Initially, for the first six months, he was covered partly by the private practice and partly by the NHS, but he was soon in a position where these payments came to an end. With his Income Protection Plus plan he was then able to start claiming his income protection benefit of £3,998.80 per month and will continue to do so until he reaches the age of 65.

As a locum Anna had to be off work for just a few days with Gastroenteritis but being self-employed this meant losing her income. Without having Income Protection Plus she would have had to dip into her savings to keep herself afloat that month but thankfully she didn’t need to.

In all these cases, PG Mutual’s Income Protection Plus plan provided these professionals with the financial safety net needed, a replacement income up until they were well enough to go back to work or as in the case of Bijal will continue to do so up until he reaches the age of 65.

Their Income Protection Plus plan meant they didn’t have to worry about their finances but could focus on their recovery.

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About PG Mutual

At PG Mutual we have one goal – to protect the livelihoods and lifestyles of healthcare and veterinary professions if they are unable to work due to illness or injury.

We’ve been providing Income Protection since 1928. We specialise in the field we know and now support professionals whether full-time, part-time, locum or self-employed.

About Income Protection Plus

Income Protection Plus provides a financial safety net during times of sickness and injury. It can pay you a regular income, up to 70% of your pre-tax income, up until you are well enough to go back to work or reach the age of 65 whichever comes first giving you one less thing to worry about.

The Plus in Income Protection Plus

Your plan also includes a profit share feature that aims to build a cash lump sum over the life of your policy for payment to you in your retirement years.

There are a lot of things that make us different

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References:

1. ons.gov.uk, May, 2024
2. som.org.uk Sep 2023
3. ons.gov.uk, June, 2024
4. ons.gov.uk, July, 2023
5. abi.org.uk March,2024

PG Mutual is the trading name of Pharmaceutical & General Provident Society Ltd. Registered office: 11 Parkway, Porters Wood, St Albans, Hertfordshire AL3 6PA.

Incorporated in the United Kingdom under the Friendly Societies Act 1992, Registered Number 462F.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, Firm Reference Number 110023

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