Most people take out a mortgage expecting to make their monthly payments for the next 20, 25 or even 35 years. But while many homeowners think about what would happen if they passed away, far fewer consider what could happen if they were unable to work due to illness or injury.
The reality is that a long-term health issue can have a significant impact on your income and your ability to keep up with household bills, including your mortgage.
This is where Income Protection insurance can play an important role.
The Risk Many Homeowners Overlook
When people think about financial protection, life insurance is often the first product that comes to mind. However, statistics consistently show that most working-age adults are far more likely to experience a period of long-term sickness than to die before retirement.
If you were unable to work for several months or even years, how would you continue to pay:
- Your mortgage
- Household bills
- Council tax
- Food and living expenses
- Family commitments
Many employers only provide limited sick pay, and statutory sick pay may not be enough to cover essential outgoings.
What Is Income Protection?
Income Protection insurance is designed to provide a regular monthly income if illness or injury prevents you from working.
Unlike some other protection policies that pay a one-off lump sum, Income Protection can provide ongoing payments until you return to work, retire, or the policy ends, depending on the cover selected.
This can help provide financial stability during what could otherwise be a very stressful period.
Why Mortgage Holders Should Consider It
For many households, the mortgage is the largest monthly commitment.
Missing mortgage payments can quickly lead to financial difficulties, particularly if savings are limited.
Income Protection can help ensure that:
- Mortgage payments continue to be made
- Household finances remain more stable
- Savings are not depleted as quickly
- Financial pressure on partners and family members is reduced
For self-employed individuals, Income Protection can be particularly valuable as they often have less access to employer sick pay schemes.
Isn’t That What Critical Illness Cover Does?
This is a common misunderstanding.
Critical Illness Cover and Income Protection serve different purposes.
Critical Illness Cover usually pays a lump sum if you are diagnosed with one of the specific serious illnesses covered by the policy.
Income Protection, on the other hand, is designed to provide a regular income if you are unable to work due to a wide range of illnesses or injuries, even if they are not considered critical illnesses.
In many cases, the two types of cover can work alongside each other.
How Much Cover Do You Need?
The amount of cover required will depend on your personal circumstances, including:
- Your income
- Mortgage commitments
- Household expenses
- Existing savings
- Employer benefits
A protection review can help identify any gaps in your current arrangements and determine whether your existing cover remains suitable.
Protection Should Be Reviewed Regularly
Many people arrange protection when they first buy a property and then never look at it again.
However, circumstances change. You may have:
- Moved home
- Taken on a larger mortgage
- Started a family
- Become self-employed
- Changed jobs
Regular reviews help ensure your protection continues to reflect your current situation.
Speak to Worths Mortgage Advisers
At Worths Mortgage Advisers, we help clients understand the different types of protection available and how they can fit alongside their mortgage arrangements.
Whether you are buying your first home, remortgaging, or simply reviewing your existing cover, we can help you explore options that could provide valuable financial support if the unexpected happens.
Protection policies have no cash value unless a valid claim is made. Terms, conditions and exclusions apply.
