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Income protection that meets changing needs

When we think of income protection, the type of client that springs to mind is often someone steadily employed in a company and earning a regular wage which they’re keen to protect.

However, our labour market has seen significant change since the 2008/09 financial crisis. In fact the number of part time self-employed people in the UK has increased by 50%1 in the last 10 years.

Unlike employed people, this group can’t rely on employer’s benefits such as death-in-service and sick pay. So unless they have built up substantial savings, how can this group expect to replace their income if they were unable to work through illness or injury?

Even if savings were in place, our State of the Protection Nation research shows that just 18% of people think their savings would last for longer than two or three months2 .

And sadly the government can’t be relied on to provide a safety net for the self-employed. They are not entitled to Statutory Sick Pay (SSP) so would need to apply for Employment and Support Allowance (ESA) instead – through the complex and increasingly controversial Universal Credit scheme3.

With ONS figures estimating the number of self-employed at just over 4.7 million in January 20181, it seems there are a large number of people in the UK with a great need to consider income protection.

Overcoming common misconceptions

Some of the reasons income protection isn’t sold as often as other protection products, such as life cover or critical illness cover, is that many people think it’s too complicated, too expensive and won’t provide them with the financial help they need.

In short – that it won’t be there for them when it matters the most.

This apprehension towards income protection is perhaps worse for the self-employed or those on temporary contracts. After all, if someone doesn’t always have a regular income, there’s no way a provider is going to adequately cover them – right? Not necessarily.

It’s down to providers and advisers to make sure the common misconceptions about income protection are dispelled. And for a group with such a great need such as the self-employed, we need to be clear that income protection is not just a suitable product for them, but one that should be at the top of their list.

To give people the confidence that the protection they’ve paid for will be there for them when they need it, providers need to make sure their products are going to make a real difference to customers – and provide them with the financial support they expect.

For example, Royal London, and other providers, have chosen to remove the ‘working tasks’ requirement from income protection, so customers are eligible to claim if their condition means they can’t do their own job.

And other elements of our cover, such as a choice of deferred periods and payment periods, enable people to tailor their cover to suit their needs – something which is particularly important for those with no entitlement to sick pay.

We also include further benefits for the self-employed, such as a minimum benefit guarantee and the ability to include dividends and P11D benefits when calculating the monthly benefit. And to support those on temporary contracts, the monthly benefit can also be calculated based on average earnings.

To find out how our Income Protection can support your self-employed clients, visit adviser.royallondon.com/protection.

Christina Rigby, Protection Product Owner, Royal London Intermediary

Sources: 1. Office for National Statistics, labour market economic commentary: March 2018. Accessed October 2018.  2. State of the Protection Nation, Royal London, 2018. 3. www.gov.uk, October 2018.

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