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Putting financial protection products into perspective… the importance of income protection

PG Mutual - 29/09/2013

Putting financial protection products into perspective… the importance of income protection

As a veterinary practice owner and an employer, you will know the importance of making sure your assets are protected. You will undoubtedly have insurance policies in place to protect your premises, and those who work within it, such as employer’s liability insurance, buildings and contents insurance, etc. – but many small business owners appear to be missing the most essential type of insurance – income protection.

 Figure 1

Some employers see income protection insurance as an unnecessary addition to the other policies that they hold; however, if they were to end up on long-term unpaid sickness leave, many people would have no means to pay for their other insurance policies – never mind the bills, staff wages, etc. If a practice owner had to cover the cost of a locum while they took sickness leave, they could end up paying the locum’s wages, as well as trying to find the money to pay their own salary – essentially, paying two people to do one job.


Employers also seem to be missing an opportunity when it comes to taking out cover for their staff. The cost of sick pay to UK businesses has been widely reported on since the start of the recession, with the bill for long-term sickness leave within the private sector estimated at around £3.1bn per year in 2012.* Taking out cover for your employees would mean paying a nominal amount per staff member per month; however, if they had to take long-term sick leave, they would be paid out from their policy – saving you the cost of covering their wages while they’re not able to contribute to the business for an undetermined amount of time.


Another reason that people often feel unsure about income protection insurance is confusion with life and critical illness cover. The difference is that life insurance will only pay out a cash lump sum when you die. Critical illness cover is similar to income protection, but instead of providing a regular monthly income, it only pays out a cash lump sum if you're diagnosed with one of a number of listed critical illnesses.


Instead, income protection is designed to cover a wide range of illnesses or injuries, where the individual requires a regular, long-term replacement income to maintain their lifestyle, pay their bills and cover the cost of paying any other insurance policy premiums whilst they complete their recovery.


Anecdotal evidence around why people don’t have income protection suggests a lack of understanding about the product and price is also an issue – many people view the product with suspicion due to confusion with PPI, whereas others fear the cost to be prohibitive. In reality, a good income protection provider will offer a level of cover for whatever the customer can afford.


Figure 2Mike Perry, Chief Executive of leading income protection provider, PG Mutual, explains, “At PG Mutual, we have seen an increase in the number of people taking out income protection over the past year, but there still seems to be a large number of people who don’t understand what it is, or appreciate the importance of it. The problem with having an accident or falling ill is that no one wants to think about it, but if it happens, it’s too late to get cover. There’s also a common misconception that if you have critical illness and life cover, you’ll be covered for this eventuality, however, they are in fact, completely different products.


“We have heard from many of our members about how having income protection in place has saved them from losing their home or business. When comparing providers, you may want to look at taking out cover with a mutual, as we are not-for-profit organisations – this means we’re focused on helping our members, not making big profits, so we will always pay out on a policy where we can. As such, we paid out 98% of claims made last year. We’re not just trying to sell another type of insurance that people don’t need. Ask yourself, if you weren’t able to work due to illness or injury, how much would your income drop by? How long could you survive on your savings? How will you support your family? Without income protection, you could find yourself falling into serious financial difficulty.”

As a business owner, having the right package of financial protection products is an essential part of business planning. While life cover and critical illness cover are an important part of this, it is also worth looking at what you would actually be covered for as part of any such policies, as you may find that income protection insurance is a more suitable option to protect you in the event of long-term sick leave.


Similarly, if you employ other staff, it is worth considering income protection as a cost-effective way of providing a sick pay strategy that ensures your employees are looked after should they ever fall sick or have an accident, without your business having to cover the cost over the long-term; which could easily add up to a considerable amount of money.


PG Mutual is a not-for-profit, mutual insurance provider who offers advice and insurance cover to professional people and business owners across a wide range of industries. They pride themselves on providing tailored cover that can be adapted to suit the needs of each individual or business, and being able to offer pricing to suit any budget.


 This article was provided by PG Mutual:


To find out more about income protection insurance and whether it would work for you and your business, you can call PG Mutual’s friendly team on 0800 146 307; or, if you would like to have a look and see how little cover could cost you, you can CLICK HERE and try the ‘Quick Quote’ tool. This allows you to put in the amount you’d like to spend each month, and calculates how much cover this could give you.



* Centre for Economics and Business Research, 2012

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