‘In my 20s, the idea I might suffer a life changing injury never crossed my mind’: Is critical illness and income protection worth paying for?

‘In my 20s, the idea I might suffer a life changing injury never crossed my mind’: Is critical illness and income protection worth paying for?

•  Three quarters of those with a serious illness spend more money on everyday living costs due to their condition
• Average £153 extra is spent a month on necessities 
• Many people shun critical illness or protection insurance due to cost 

By GEORGIE FROST FOR THIS IS MONEY

PUBLISHED: 08:54, 7 May 2019 | UPDATED: 08:54, 7 May 2019

Ten years ago, while the world was in the grips of a financial crisis, I was going through a financial crisis of my own.

In 2008, at the age of 26, I suffered a life-changing back injury.

In the short-term I couldn’t work for almost a year, and in the long-term I have been left with permanent nerve damage and chronic pain.

Every year, around 1million people employed in Britain are unable to work due to injury or illness, according to estimates from the Association of British Insurers.

However, the loss of income may not be your only financial concern – the cost of everyday life can also increase.

Why everyday life costs more…

Of those who have suffered a serious illness, three quarters say they had to fork out more for basic necessities as a result of their condition, according to Direct Line Insurance.

On average, £153 extra a month – or £1,836 a year – is spent on increased travel costs, hospital visits and parking, medication and home adaptations.

‘When someone is diagnosed, it can turn family life upside down,’ said Jane Morgan from the company.

‘Everyday tasks often become far more difficult; frequently preventing individuals from working, resulting in a loss of earnings, at the same time as living expenses are increasing.’

The extra costs were found to be higher for those aged 18-34 compared to those over 55.

Think the unthinkable

Back in 2008, I had a staff job and received statutory sick pay which currently is £92.05 a week for up to 28 weeks.

A decade ago it was £75, certainly not enough to live on as a single person.

I fell back on my credit card to pay for everyday costs which took much of the next decade to pay off.

Now, I am among the growing army of freelancers in the UK but with the benefits of increased freedom and variety of work comes increased financial insecurity.

It is important for all workers though to make sure that plans are in place should the unexpected happen

Multiple sclerosis: ‘It’s a scary diagnosis’, says Rosie – ‘life definitely costs more’

Rosie Tong, from Canterbury, was diagnosed with multiple sclerosis in January 2016 aged 22.

‘It’s a scary diagnosis,’ said Rosie. ‘The first thing I did was to ask the neurologist how long until I was in a wheelchair. I didn’t know it was a young person’s disease.’

‘I thought my fiancé wouldn’t want to marry me anymore and that I would be a burden to my family.’

Rosie says it has taken her three years to come to terms with her illness’s impact on her body but not on her finances.

‘I don’t know how I would cope without the support of my now husband Christopher and my family.’

‘My employer has been really supportive but in the three years since diagnosis I have been off work more than I have been at work and I don’t get sick pay.’

‘Life definitely costs more,’ she said. ‘I do have a concessionary bus pass but it is only off-peak. I often need to get taxis or order take away if I can’t cook.

‘I make up to thirty hospital trips a year, which involves taking two buses, or driving – which costs me in petrol and hospital parking.

‘I also often have to pay for lunch or snacks, as hospital appointments are never on time.’

What is critical illness insurance?

In my twenties, the idea that I might suffer a life changing injury never crossed my mind.

I didn’t have a savings pot big enough or a benefits package from my work to cover me – critical illness cover could have helped soften the blow.

‘Critical illness cover can help protect people against the financial impact a serious illness can have on someone’s life,’ says Jane.

‘It could help towards additional travel costs or household bills whilst you’re unwell, enabling you and your family to continue day-to-day life.’

The policies pay a tax-free lump sum after you have been diagnosed with any of a number of specified conditions.

They are not cheap though and premiums increase with age and the state of your health, for example whether you are a smoker or not.

It is important to check what exactly is covered and the degree of severity of that condition needed for a pay-out.

But according to the ABI, around 92 per cent of critical illness claims are paid to policyholders.

How much cover do you need?

Jane adds: ‘When thinking about how much critical illness cover you might need, you may consider the financial commitments you already have.

‘This could include mortgages, childcare or day to day living.

‘It is important to consider the costs that could need covering if you’re unable to work as a result of long-term sickness or disability.

‘Product providers have their own lists of specified critical illnesses so it’s important to understand what’s covered and what’s not.

‘The list of illnesses we cover includes many types of cancer, heart attacks and strokes.

‘For example, some types of cancer are not included and you need to have permanent symptoms to make a claim for some illnesses.’

Income protection insurance

Income protection insurance pays out if you can’t work due to illness or injury, this could range from a serious injury, to stress or depression.

Unlike critical illness insurance, it does not pay out a lump sum – instead it will provide a monthly income of up to 80 per cent of your salary until you are healthy enough to return to work or retire.

It has never been a best-seller – partly because it is seen as complex and pays out smaller amounts each month instead of one big sum.

Some experts argue, however, that this is the best form of protection insurance if bought right.

It is vital to check what the policy covers and to find a decent policy it is worth seeking out independent financial advice.

One of the key issues is whether the policy will pay if you cannot do your own job or if you cannot work at all.

There are a lot of income protection policies around, but it is essential to realise they are not all the same. Cheap cover may not deliver when you need it, so it is worth paying for a good policy.

Things to think about include:

• The level of monthly payments required
• Whether cover is level or increases in line with inflation
• Whether premiums are guaranteed to stay the same over the policy’s term or whether they could rise
• At what age the policy should finish. Usually, it is between 60 and 65 to coincide with retirement although it is also possible to have short-term policies that only pay out for two years
• When the benefit should start to pay out in the event of a claim. This can be as early as four weeks and as long as 52 weeks. The earlier it pays out, the more expensive it is – the longer you can delay it the cheaper it gets. Consider how long your work’s sick pay runs for and any other protection you may have.

Other help

Being diagnosed with a life changing illness or injury can be a terrible shock but it is important to remember that you have rights and there is support available.

Statutory sick pay is a legal requirement when you are unable to work.

Those returning to employment are covered by the Equality Act which makes it unlawful for an employer to treat anyone less favourably because of disability.

Employers must make ‘reasonable adjustments’, which includes giving staff time off for medical appointments and offering flexible working hours.

Your doctor can point you in the direction of any support groups and Citizens Advice is invaluable in knowing what your rights are and what benefits you may be entitled to.

I was too proud to ask for help, and it cost me dear.