Protection – help in a changing world

27/10/2021 / Liberty news

Life before Covid now seems like a very distant memory. It’s easy to overlook how suddenly it seemed to unfold, moving rapidly from the periphery of our lives to changing everything within a matter of weeks.

Little wonder, then, that so many felt unprepared for it, not just emotionally and mentally, but also financially. In many cases, the financial impact was exacerbated by the fragility of the financial defences people had in place.

Large numbers of people have seen their jobs disappear – temporarily or permanently – and their incomes hit hard. While financial advisers typically recommend having at least three months’ worth of rainy-day cash savings to dip into in the event of an emergency, the reality is often very different. More than a quarter of households with at least one person in employment would be unable to cover a three-month drop in household employment income of 25%, according to the Office for National Statistics1.

The first line of defence against financial troubles is to build a rainy-day fund that ensures you can cover your regular payments for a while – even if your income falls. But longer-term defences in the form of financial protection are needed too.

One option is insurance, with income protection right at the top of the list. These policies are designed to help you cover regular commitments such as mortgage repayments, rent, bills and other household essentials if you’re unable to work because of illness or an accident. Unemployment can sometimes be included as an ‘add-on’ to these policies. Income protection typically pays out between 50% and 65% of your income if you’re unable to work, and most policies will do so for as long as needed. Payments start after a pre-agreed deferral period (usually of three to six months) has passed.

If the cost of income protection is a concern, there are ways of getting it down. For example, policies can be arranged to cover a fixed period of time rather than the rest of your working life. With around 95% of income protection claims ending within five years, shorter policies would still cover most people’s requirements while significantly reducing the cost.

However, the pandemic may complicate matters if you have a pre-existing medical condition and you’re looking for insurance. “If you have underlying medical conditions that make you more vulnerable to the coronavirus, it may take a bit longer to get standard forms of protection at the moment,” says Paula Read, Head of Protection Proposition at St. James’s Place Wealth Management.

Whether you are buying your first home or downsizing, starting a family or retiring, speaking with a financial adviser can offer help with organising and planning for a better future. 

1 ONS, Financial resilience of households; the extent to which financial assets can cover an income shock, April 2020



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