When it comes to falling ill or being injured for an extended period of time, we often think it won’t happen to us. But when questioned about it, research shows it’s something that worries more than half of us. When you consider the potential financial implications, it’s not surprising.
According to research from Royal London, 52% of workers worry about their income if they were to become too ill to work for longer than a month. With official figures showing this is the case for more than a million workers every year, it’s more likely to become a reality than we’d like to think. Differing sick pay policies means it can be difficult to calculate how you’d cope financially should something happen, but it’s an important step to take.
Jennifer Gilchrist, Protection Specialist at Royal London, said: “Falling ill unexpectedly could happen to anyone. With a million workers off sick for more than a month, it’s important to think about how you would manage financially and make a plan, so you do not have the added financial worry if you were to fall ill.”
Statutory Sick Pay (SSP)
For workers, SSP is designed to act as a financial safety net should something happen. However, for many, it’s not enough to cover even the essential household outgoings.
To qualify for SSP, you have to be off work sick for four or more days in a row. It’s paid by your employer for up to 28 weeks and is currently £92.05 per week. While SSP can provide you with some certainty while you recover from an illness, 42% don’t think it would be enough to live on if they were off sick for a long period of time. For many families, the loss of income would leave a shortfall and may affect financial security.
Employer sick pay
In addition to SSP, some employers may also offer sick pay. Sick pay policies can vary significantly. However, a quarter of those surveyed by Royal London mistakenly believed sick pay was the same across all companies.
Worryingly, one in six workers doesn’t know what their company’s sick pay policy is, potentially placing more stress on them should they become ill. Even among those that do have the support of employer sick pay, 60% found the policy difficult to understand. Getting to grips with your sick pay policy is important for planning other measures that may support you.
Protecting your income
The average UK worker stands to lose almost £450 in pay when they’re off sick for a week without employer sick pay. If it’s a loss that could cause you financial hardship over the short, medium or long term, it’s wise to think about how you can take steps to improve the outlook.
One place to start is building up an emergency fund that can support you should your income unexpectedly stop. The Money Advice Service (MAS) recommends having between three and six months’ salary in an accessible savings account to tide you over. This can give you peace of mind that the immediate is taken care of, allowing you to focus on your recovery.
However, for long-term illness and injury, an emergency fund may not be enough. This is where protection products can provide you with some security.
There are a range of protection products on the market, including those that will provide you with a source of income should you become too ill to work. Policies may pay out a lump sum or monthly amounts, often a portion of your typical income, depending on the option and premium you choose.
Even if your employer offers sick pay, protection can still be worthwhile. Sick pay policies will usually run for a defined period of time, what happens when you get to the end of this? As income protection products can have varying deferment periods, you can pick out an option that will dovetail with your employer’s policy and emergency fund. Typically, the longer the deferred period, the lower your premiums are.
It’s important not to look solely at income too. While your family may not rely on your income, illness can still have a significant impact. If, for example, you are the main provider of childcare, could your family cope if you were to need extra support? It could mean further expenditure for childcare providers that could place pressure on finances at a time when you’re likely already feeling stressed.
Most income protection plans have different definitions which vary between product providers. Most have no cash in value, and if premiums stop, the cover may lapse with no return of premiums.
If you’d like to discuss protection products and which are right for your situation, please contact us. We’ll help you understand how they can support your financial security and other steps that you’re taking.
