Picture this: you’re a tenant living your best life. You’ve got a nice little flat, a thriving houseplant collection, and a fridge stocked with enough snacks to get you through a long weekend. Life is good. But what would happen if, suddenly, your reliable monthly paycheck hit the brakes? This is where income protection swoops in to save the day.
What is Income Protection?
Income protection is like having an emergency parachute for your finances. It’s an insurance policy that ensures you still get a portion of your income if you can’t work due to illness or injury.
Think of income protection like private sick pay. Most companies will only pay a week or two’s sick pay but if you’re off long-term ill or recovering from a broken bone and need to spend 8 weeks at home with an elevated foot; what happens then?
Why should tenants have it?
When the tough times come, you’re still responsible for your rent, bills, groceries, and, of course, that all-important streaming subscription that you’ll rely on while you’re recovering. If your income suddenly dries up, landlords aren’t known for taking payment in ‘IOU’s or offering a rent-free holiday just because life took an unexpected turn - they likely still have a mortgage to pay.
The grim reality of “What If”
You might be thinking, “But I’m healthy! I go to the gym! I do yoga and eat quinoa!” And while that’s great (and good for you!), life’s curveballs don’t always pick and choose their targets. Illness or injury can strike when you least expect it, and income protection can keep your finances in shape while you get back on your feet.
What does it cover?
Income protection policies usually cover any illness or injury that stop you from working or cause your earnings to decrease. The policy will pay out a monthly benefit amount which is usually up to a maximum of 65% of your gross salary for as long as you’re incapacitated, or for the agreed benefit period.
You choose the benefit period – full cover means that the policy will pay out until the end of the term or retirement age; or you can choose a 1 or 2 year benefit period which is the maximum period the benefit will pay out for each individual claim.
You also choose the deferred period which is the amount of time that has to lapse before your claim begins – this can be as little as a week or a few months. So if your work will provide 2 weeks full pay, and you have savings to keep you going for another 2 weeks, you can set your policy to start paying out after 4 weeks of being incapacitated.
Peace of mind is priceless
With income protection, you don’t have to worry about calling your landlord with that awkward, “Hey, so about next month’s rent…” conversation. Instead, you can focus on resting, recovering, and binge-watching your favourite shows without the underlying soundtrack of financial anxiety.
Let’s imagine you’re a data analyst – not exactly a risky occupation! However, if you fall ill and are subsequently diagnosed with MS and have to stop working because you can no longer type – a full benefit income protection policy will pay 65% of your gross salary for the rest of your working life, giving you the peace of mind knowing you’ll still in effect have a salary and be able to afford your rent and bills.
If you get diagnosed with cancer and have to take a year off to attend ongoing treatment, a 1-year benefit policy will pay out for that year so you can focus on your health and recovery without the stress of moving or having to find money to keep the lights on.
Only 3% of UK renters have income protection in place
And yet 2.82 million adults of working age were unable to work due to long-term illness in just the first quarter of 2024.
Being a tenant doesn’t mean you have to live month-to-month with your fingers crossed. Income protection can be your safety cushion, allowing you to handle life’s hiccups without missing a beat (or a rent payment). It’s the ultimate adulting move - right up there with sorting out a pension and mastering your grandma’s roast recipe.
And remember: It's cheaper to buy ten years of income protection early than one minute too late! The younger and healthier you are when you take out a personal protection policy like life insurance or Income Protection, the cheaper it will be.
Don’t leave it to chance
We don’t think twice when it comes to insuring our cars, our devices and our holidays. Ensuring your income is protecting your livelihood in the times when you’ll need it the most. Your future self will thank you!