Need for Income Protection

Income Protection can help you protect yours and your family's standard of living by providing a monthly income should illness or injury prevent you from working.

 

Why would I insure my earnings?

The likelihood of being unable to work due to an illness or accidental injury is greater than you may think: Of the 27.9 million people currently employed in Britain, over 2 million people have been claiming State Incapacity Benefit for more than six months.
 

Those who do not qualify for SSP or OSP, e.g. the self-employed, may claim ESA directly. If you have made sufficient National Insurance contributions and claim ESA directly, you will enter a 13 week assessment period. During this you will be paid £47.95 p.w. if you are aged under 25 or £60.50 p.w. if you are 25 or over. Unlike Incapacity Benefit, there are no additional payments where ill health occurs under age 45.

If you are employed and in receipt of Statutory Sick Pay or Occupational Sick Pay, you can apply for ESA after 15 weeks sickness absence (13 weeks before entitlement to SSP ends) to ensure no delay in your receipt of ESA. However, you will still need to serve the same assessment period at the benefit rate of £60.50 p.w. described above. During the assessment period a health professional will establish your capability to work, your ability to engage in work-related activity and, if you are considered capable of work-related activity, an assessment will be made of any interventions that might improve your capability to work. If you fail to provide the information requested or fail to attend for examination if requested, your eligibility for benefit could be denied. At the end of this 13 week period, if you are considered capable of work-related activity you will be allocated to a work-related benefit group, if not you will be allocated to a support benefit group. Estimates are that around 90% of new claimants are likely to be in the first group and 10% in the second.

In the work-related group:

1. You will receive a benefit of £84.50 p.w. (all age groups).
2. This will be conditional on:
3. Attending a series of work-focused interviews.
4. Agreeing an action plan aimed at getting you back to work.
5. Failure to observe these conditions could see your benefit reduced back to £60.50 p.w. in two stages, depending upon for how long this continues.
6. You are also under an obligation to follow medical advice about the treatment of your condition.
7. In the support group:
8. You will receive a benefit of £89.50 p.w (all age groups).

 

No conditions apply but you are free to seek work-related advice and support should you wish to do so.
If you have not made sufficient National Insurance contributions or you are in receipt of ESA via the contributory route but feel you have insufficient income to live on, you may apply for means tested support. Means testing means that any regular income you or other family members receive including any earnings, Incapacity Benefit or ESA (but not Disability Living Allowance), and most insurance payments will be offset against the benefit you qualify for. In addition, those with capital of £16,000 or more are not eligible and the rates are reduced if you have between £6,000 and £16,000. However, the value of your home, the assets of any business you own or any personal pension fund do not count towards these capital limits.

For ESA claimants meeting the means tested criteria, benefits for single people in the work-related group are unchanged. However, if you have no other relevant income and are in the support group you will receive an additional £12.60 p.w. If you are part of a couple, your benefit could rise to £118.95 p.w. (work-related group) or £142.10 p.w. (support group). There are also possible further increases if you or your partner is aged 60 or over, your disability is such that you qualify for Disability Living Allowance or you are entitled to a carer’s allowance.

Other benefits also available via the means tested route are:

 

1. Council Tax Benefit – assistance with Council Tax payments.
2. Housing Benefit – assistance to those living in rented accommodation.
3. Mortgage Interest relief - a limited contribution towards your mortgage interest payments (normally after a 9 month waiting period).

Finally, if your state of health is such that you need the help of another person with personal care (washing, dressing, eating etc) or you have difficulty walking, you may also qualify for Disability Living Allowance.

What does this mean for me?

The new assessment test is being applied earlier in the claim period, is more comprehensive and covers not only what you cannot do but what you can do. There was a substantial failure rate under the old test but this is expected to rise to something like half of all claimants under the new criteria.
For most claimants, payment of benefit will be conditional on engaging in work-related activity. If you are an existing Incapacity Benefit claimant, the transfer process to ESA (including re-assessment under the new criteria) is expected to begin in 2009 (for those under age 25) and be completed in 2013.
Even with the support of means tested benefits the amounts available remain well below income levels that many consumers are accustomed to, emphasizing that if you do not insure, you are risking your capital and possibly your home.

Illness or disability can quickly drain your savings and investments and is a common cause of repossession of homes in the UK.

"A great price with all the benefits I need for my family"

Paul Marshall, Birmingham