Illness and Accidents aren't choosy - They'll pick anyone
The Government's new welfare reform systemsthat became effective in October 2008 radically change the way in whichbenefits are paid for illness or disability under the new Employmentand Support Allowance system leaving those people without incomeprotection vulnerable.
Under the old system of State benefits (replaced this October),anyone claiming was not forced to seek work whilst they wereincapacitated from work. However, it is a whole new picture now.Claimants are forced to undertake any type of work that they aremedically able to.
The following is a real life case study personal to David Warren of LV=
"I used to believe that there was no need for any type of healthinsurance for myself. This was because I was young fit and healthy. Whyon earth would I need to worry about being incapacitated? On top ofthis, my work will pay me a benefit for 6 months if I am off sick. Inaddition to this, surely I could rely on the State to look after me -after all, I pay my taxes and my national insurance?
An event that occurred 4 years ago involving my brother in law mademe see it in a different light. Kevin, aged 34, worked as a selfemployed sales rep. They (my sister and Kev) have 1 child aged 3. Kevwas the main breadwinner and the family relied heavily on him beingable to work.
Kev was involved in a car accident with a drink driver. This lefthim with a severely broken leg, broken pelvis, broken ribs, dislocatedshoulder and nasty head injuries. Although not life threatening, it wasevident very early on that he would not be returning to work for a longtime.
What did this mean?
* Both my sister and Kev were quite sensible people - they had lifecover and also had over 3 months worth of savings to fall back on. Kevwas owed money from sales already completed so all in all they couldsurvive for 4 months.
* Kevin was told he wouldn't work again for at least 18 months andwould almost certainly never return as a sales representative doing30,000 miles a year.
* State benefit was eventually paid - Kev received less than £80 aweek whilst he was off. This barely covered the weekly food bill forthe family.
* The first thing they had to do was sell their house. They hadmoved in to a lovely 3 bedroom house in Cheshire 6 months earlier, witha view to having another child, and had mortgaged quite heavily asbusiness was good for Kev. It was not an option for them to maintainthe higher mortgage payments so they sold the house.
* They moved in to a 2 bedroom house in an area that was certainlynot their first choice for raising children but it was all they couldafford.
2 years on:
* Kev is now back at work which is great news.
* He works in a local supermarket as a checkout operator and does about 10 hours a week.
* He has not driven a car since the accident.
* The plans for another child have well and truly been put on hold as they just cannot afford it.
What could they have done?
The answer is simple - Income Protection insurance.
The premium for Kev to have £1,500 a month in benefit would havebeen £42.49 monthly. They could have stayed in their dream house, theone that they had both worked so hard for.
I took my cover out 3 days after Kev's car accident".
There are many car accidents every day, as well as generalaccidents. These are normally unexpected and can have dire consequences- not just for the person injured but for the whole family.
As well as accidents like Kevin's there is also illness and disability to consider, sometimes long-term. Statistics provided by statistics.gov.ukshow that 1 in 4 men have a chance of suffering a critical illnessbefore retirement age; women's odds are marginally higher with a 1 in 5chance.
In the contracting industry there are many individuals who haveearned good money and have saved a good nest egg for their future. Theyare financially responsible and wise enough to protect their futurelifestyle.
But, what if something terrible happened? An accident, illness or disability?
Under the new State system any savings over £16,000 disqualify youfrom benefits. From as low as £6,000 in savings your benefits arereduced. So all your hard earned money would end up financing youthrough your incapacity for work - and who knows how long that could be?
Government statistics say that 50% of claimants on IncapacityAllowance have been on benefits for 5 years and as John Hutton, formerSecretary of State for Work & Pensions quoted "after two years onState incapacity benefit, people are statistically more likely to dieor retire than return to work".
LV= in the private sector state that there average claim lasts for a seven year period.
All too often in the Financial Services industry I see advisorsselling the "sexier" products such as pensions and investments. In aworld where medicine is so advanced, even from 25 years ago, people areliving longer with illnesses that they would previously have died of.
It is paramount to make people aware that the Protection Insurancesare far more important than retirement planning due to the way healthand lifestyles have evolved.
Government warning - "Years existing off State benefits could be a seriously stressful and detrimental to your health"
It is important to keep up future payments, in order to ensure that the cover under the plan continues.
At no time during or at the end of the term does this policy provide a surrender or encashment value.