Income Protection - four ways you can create financial peace of mind
Posted by siteadmin on Thursday 1st of April 2021.
Following a turbulent 2020, where many people have had to take time off work as a result of illness, a loss in the family or other hardships as a result of the pandemic, many have been left worrying about their financial stability.
In addition, an unstable financial situation across the country has left numerous employers with the difficult decision of letting members of their team go, heightening the worry for many of those still in work, concerned about their job and financial security.
However, as an employer, there are various benefits you can offer to your team to give them financial peace of mind. Alternatively, as an individual, there are ways you can protect your own income, if you are not in receipt of benefits from an employer.
So, how can you create financial peace of mind?
1. Offer better than statutory redundancy pay
An as employer, you are required to pay a ‘statutory redundancy pay’ to any employees whose role has been made redundant. However, the legal statutory redundancy pay is only eligible to those who are an employee under contract and have at least two years of continuous service.
The amount for statutory redundancy pay varies, dependent on an employee’s age and length of service.
However, as an employer, you are able to determine your own redundancy policies. For example, you can give your team additional redundancy pay or have a qualifying period of less than two years.
Providing a greater redundancy pay than what is required by law can help to give your employees greater financial peace of mind, as they will have an understanding of the income they will have, should their role be made redundant. Additionally, it shows how much you value your team.
2. Income protection
Income protection insurance (sometimes known as permanent health insurance) is a long-term policy, which supports you if you are unable to work due to ill health or injury. It provides you with a regular income until you retire or are well enough to return to work. The amount paid is generally a percentage of your salary, which bridges the gap until you are able to return to work.
As an employer, you can set up income protection policies for your team, and you can offer to contribute an amount to this policy, or simply assist in the process of setting up the cover.
Income protection insurance, unlike critical illness cover, covers most illnesses that leave you unable to work, and you are able to claim as many times as you need to within the policy period.
3. Critical illness cover
Critical illness cover, similar to income protection insurance, provides you with a lump sum if you are diagnosed with or suffering from specified, potentially-life threatening illnesses. The amount is paid in one instalment, rather than in regular intervals.
It will only cover specific illnesses, which will vary between providers and be outlined in individual policies.
Employers are able to set up critical illness cover on behalf of their employees, to provide financial protection and ensure obligations are met if employees were unable to work due to severe illness.
4. Life insurance
Life insurance pays an amount – in a lump sum or regular payments – to your dependents if you were to pass away. It’s designed to ensure that those who depend on you financially, such as a partner, children or anyone else in your care, are supported if were no longer able to provide for them.
The cost will depend on the level of cover you require, and you can often determine this amount by working out how much your financial obligations equate to over an extended period of time.
As with income protection and critical illness cover, as an employer, you are able to set up life insurance policies on behalf of your team and support them through the process. You may even want to consider paying the monthly contributions for your team.
For advice on how you can secure financial peace of mind for yourself or your team, get in touch or call 0121 285 8528.