Workers Without Income Protection are at Risk
Research conducted by public policy think tank Demos and commissioned by Unum has shed light on the serious vulnerability individuals could experience due to a lack of income protection insurance. The report suggested that those who belong to what it termed “the squeezed middle” could face a massive loss of income if long term illness occurred, especially given that only 11% of the workforce holds income protection insurance.
Those who lack income protection and cannot live off savings will have to rely on the government’s Employment and Support Allowance, which replaced Incapacity Benefit in 2008. With a maximum annual benefit payout of less than £5000, those who rely on this support could see a catastrophic loss of earnings. An individual with a yearly income of £25,000 for instance, would face an 80% fall in earnings, which could drastically affect their quality of life.
The report calls for reforms to encourage the growth of the income protection market, including tax incentives for firms who insure their employees and making income insurance more accessible for public sector workers. Income protection can provide up to 80% of your income if you become too ill to work for a prolonged period of time.
Jack McGarry, CEO of income protection provider Unum UK, commented: “As a nation we have too much focus on life insurance and not enough on income protection. Just 1 in 10 UK workers have their income protected if they fall ill. For most people the support available from the state is not adequate and would mean a big change in their standard of living.”
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