Over three-quarters of UK workers would return to work before they had fully recovered from a serious injury or illness, due to concern for their income and the well-being of their families, according to new research published this week by personal insurances specialist Aviva. Despite this, uptake of income protection insurance is still low, with a national income protection gap estimated at £19bn.
Of those surveyed, 68% listed family finances as their major concern when on sickness leave, and 29% listed their mortgage payments as their primary issue within that. For 11% of those surveyed, a return to work before they had fully recovered would be driven by a fear of losing their job.
The survey also revealed that 79% of employees believe they could not get by on less than half their full salary, if they were forced to do so by a prolonged leave of absence. Only 40% of companies undertake to provide half salary or higher payments to staff on long-term absence, Aviva added.
“The disturbing findings in our survey highlight just how poorly equipped to survive a period of long term absence many of us are and how this can lead us to make decisions we might live to regret,” said an Aviva spokesperson.
“The irony is that by taking out income protection – which pays a regular tax free income should you be unable to work due to illness or personal injury – families could easily be spared from may of the hardships of long term absence.”
The probability of the individual worker finding themselves incapacitated by illness or injury is relatively high, Aviva said, again highlighting the need to factor temporary loss of income into our financial planning.
In 2009, there were over 2.4m people aged 18-64 in the UK claiming incapacity benefit. Of those, over 80% were claiming for over six months, and 40% were claiming for more than 5 years.
Hi John, Isn’t true that income protection policies only pay out after a few months of being off due to sickness, or is that critical illness? I’m confused… Maybe you could enlighten me on this one?
Dear Tommy,
Income payment protection insurance (IPPI) comes with a ‘deferred period’ of typically 4 weeks, but possibly up to 2 years, before the insurance kicks in. The longer the deferred period you are prepared to accept, the cheaper your premium. After that, IPPI gives you a replacement salary paid monthly and tax-free, and you get that no matter what other benefits you are receiving. This salary would typically equal half your working salary. Your IPPI can run for a specified time, or, depending on the policy you choose, even until you retire – in which case it is often called ‘permanent health insurance’. Also important to note that IPPI only covers health issues, not redundancy. Critical illness, on the other hand, pays an immediate, once-off lump sum, when ungracious fortune strikes you down.