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Should Parents Have Income Protection?

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Bringing children into the world really puts life into perspective. Everything looks a little different through the eyes of a parent as you do everything possible to keep your bundle of joy safe, warm and healthy.

The weight of responsibility can feel pretty scary sometimes, and financial worries that you hadn’t thought too much about before may surface.

For instance, what would happen if you or your partner lost your income? Now that you have a tiny mouth to feed, you rely on that money coming in each month more than ever.

For this reason, this is often the time that many parents begin to look into income protection insurance. Here are a few reasons why this insurance product is so important for parents.

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How does income protection work?

The idea of income protection is pretty self-explanatory – it protects your income. If you become too ill or injured to go to work, your policy will pay out a regular tax-free percentage of your salary (typically between 30-50%, you choose when you take out your policy), to help you keep life ticking over as normal.

When taking out your policy, you may also be asked to decide on a ‘deferral period’. This is the amount of time that must pass between making a claim on your policy and receiving your income.

Whether or not you opt for a deferral period will depend on whether or not you have sufficient sick pay or savings to cover you before your payouts begin. The deferral period can be anything from four weeks to two years. Basically, the longer your deferral period is, the cheaper your monthly premiums will be.

Once you make your claim and your deferral period ends, you could receive a regular income until you either:

  • Recover and return to work
  • Reach state pension age and retire
  • Reach the end of your policy term
  • Stop paying your premiums and your policy ends
  • Pass away

If you make a recovery and get yourself back to work, you can actually claim again as many times as you need to on the same policy up until your policy term ends.

Ok, so why is income protection so important as a parent?

To be honest, income protection is really important for any working person with financial responsibilities. Even if you have just turned 18 and you have a car with car insurance to pay for each month, income protection insurance is something you should maybe consider. When you move out and begin paying rent or get your first mortgage, income protection is even more important to consider.

When you begin a family, however, income protection really should be part of your protection plan. If you became too ill or injured to work and thus pay your mortgage/rent and bills, what would this mean for your family?

Would you need to sell the house and move in with the in-laws? Would you be able to afford to feed and clothe your little ones? Depending on your injury or illness, you may also need to pay out for healthcare or specialist equipment to care for yourself.

It’s one of those things that you never think will happen to you until it does. Think about it – are you more likely to pass away or become seriously ill or injured before retirement? Probably the latter.

Having an income protection policy in place is the peace of mind you need to know that should the worst happen, money won’t be another thing to worry about.

Hopefully, you are now at least considering doing more research into income protection. Perhaps get in touch with a broker who can talk you through your options and help you take the next step. Life as a parent is the most magical thing after all – surely that’s worth protecting?

Disclosure – Advertisement feature for Life Search – content is for informational purposes only, always seek independent financial advice when required. For full details of my disclosure policy please read here.