7 Common misconceptions you may have around Income Protection
It’s a frequent misunderstanding that employers don’t think Income Protection is important. They do, they just don’t know enough about it, it is the one protection policy every working adult in the UK should consider.
#1: It’s not important
As an employer are you aware that Income Protection covers a percentage of your income if an employee is unable to work due to illness or injury – this is one of the most important insurances you can get in place for your employees.
#2: My business doesn’t need it
When the costs of running a business are high, business owners can too easily shrug Income Protection off as not essential. This is a dangerous misunderstanding. Unfortunately, illness and injury do happen. In fact, their employees are 3 times more likely to go on long-term sick leave than they are to die during their working life1. But while many employers are happy to put Life Insurance in place to protect their employee’s families financially against death, just 10% of people have Income Protection, the one insurance that continues to provide a percentage of an employee’s salary if they were to go on long-term sick leave.
#3: Income Protection covers redundancy
It doesn’t. Income Protection is often confused with products such as Payment Protection Insurance (PPI) and Mortgage Payment Protection Insurance (MPPI) which cover specific repayments that can’t be made due to illness, injury or redundancy. However, unlike Income Protection, these payments stop after a limited time – usually 12-24 months. Income Protection payments cover a percentage of your income and can be arranged to continue until you return to work or retire.
#4: Employees don’t value it
Many employers wrongly think their employees don’t value benefits such as Income Protection – opting instead for laptops, extra holiday dates and gym membership. But with 77% of employees admitting to feeling financially insecure, knowing they’ll get a replacement income if they’re ill or injured is something they’re likely to care about.
And, while Income Protection is available for individuals to take out themselves, offering it through the workplace means employers can offer a benefit that is more affordable due to the spread of risk, available to people with previous medical conditions and accessible to employees who don’t have an IFA to buy from.
#5: The state will provide for my employees
Most employers don’t realise what would happen if their employees were to go on long-term sick leave. In fact, although many of them go further, they are only obliged to pay Statutory Sick Pay for 28 weeks. The State benefit that then kicks in only pays around £5,300 a year for the average person, which is 80% less than the average salary.
#6: It only benefits my employees, not my business
Unlike other benefits such as Life insurance and Private Medical Insurance, Income Protection gives you a return of 48p on every £1 you spend through covering an absent employee’s salary (up to 80%), reducing loss of productivity and recruitment costs (by getting employees back to work quicker) and freeing up HR time and effort that typically goes on absence management. Income Protection can also cover National Insurance and pension payments, which is important now given every business will go through auto-enrolment by 2018.
#7: It’s too expensive
There are various different levels of benefit available contact us for further information. Simply, Income Protection is the insurance that employers can put in place whatever their budget to protect their workforce should they suffer from short-term or long-term sickness absence – and ensures peace of mind in the good times and adequate protection in the bad times.
If you would like further information on Income Protection please contact us on 01908 523 420 or email firstname.lastname@example.org
Source: Unum – busting the myths around Income Protection