Income Protection......how important is this to you?

Did You Hear The One About The Insurance Broker
Who Didn't Insure Themselves?

This is a true story, the names have been changed to maintain confidentiality, but everything else is accurate and true.

Several years ago in the mid 1980's, a small but successful insurance broker in the West Country had two partners, 'Jim' and 'Mary'.  Over the years, the business had flourished, and the two partners not only earned a good income, but were also able to retain surplus profit within the business working towards a  comfortable retirement in February 2008.

Jim had the foresight to protect his income in the event of not being able to work through sickness.  After a period of one month, he could have received 50% of his income (£650) without tax in addition to receiving the very generous state benefits - valued today at £72.55 per week.  Jim felt that he would rather be in the position of having his income drop from £1,200 net per month to £914(including benefits), rather than reducing to a mere £72.55 per week.

Jim thought that the premiums were well worth the cost as in the event of sickness, his lifestyle would be considerably easier than living from the Statutory sick pay, and of course, he would receive this income until he returned to work, or reached his planned retirement age.

Mary however, not necessarily being a good time girl, but preferring to live for today rather than worry about tomorrow, felt that her savings in the business was sufficient, and she would rather spend £40 per month on enjoying herself, rather than protecting her income, so did nothing, and carried on happily oblivious.

Several years went by, Jim paying his premiums, and Mary enjoying herself, when one day Mary fell ill and was unable to work again.  As a result, in order to sustain herself financially, she began to draw funds from the reserves built up by the business.  This carried on until the value of the reserve was virtually depleted, thus robbing Mary of the funds to support her in retirement.

With all the additional stress and strain, Jim unfortunately suffered a stroke, which also meant that he was unable to work.  Fortunately for Jim, he was able to claim on his income protection insurance, which in turn enabled him to receive a manageable income, and not further drain the resources of the business.

After some time, Jim's son took over the business in its entirety, and of course Mary's income ceased as the funds had been completely drained.  Jim continued to receive his income, and indeed did so up until his planned retirement date of February 2008.  Although not terminally or very seriously ill, Jim is still unable to perform the material duties of his job, and as such was able to claim on his plan.

Now in retirement, Jim has not had to draw significantly on his own savings to support his income due to the protection plan put in place, and can now look forward to a financially solvent retirement.

In his own words "I thought it would be easier to find £40 per month when I could afford it, rather than £1,200 a month when I had no income".

Jim is now faced with Inheritance Tax planning issues due to the size of his estate, whilst poor Mary has just the state pension of £87.30 per week.

Thought for the day - It's amazing how many people don't insure against sickness because they 'are never ill', yet they are keen to protect their mortgage in the event of death, - not many of them have died before they cover themselves.

"Don't lock the stable after the horse has bolted"

Although here we have used the example of an insurance broker, the exact same applies to any business, including chiropractic. To find out more information about how important this insurance is to having peace of mind that your income is protected in the event of sickness, contact us for a free consultation.

J Squibb
Independent Financial Advisor (IFA)

01872 271655