CASE STUDY
What is Income Protection?
Income protection insurance is designed to cover the loss of income caused by illness or injury. It offers to cover part of the policyholder’s salary and provides additional support to get employed and self-employed individuals back to work as soon as possible.
Why do Barristers need Income Protection?
Almost 80% of barristers are self-employed sole traders working through a set of chambers. Generally, this means they will not receive any form of sick pay, should they fall ill or become injured.
Mental health issues such as stress, depression and anxiety are some of the most prevalent issues for barristers and members of the court and form 15% of all income protection claims, alongside muscular-skeletal problems and cancer.
Barristers without income protection may have to face the prospect of working with an illness or injury which may prolong recovery or in more severe cases, they may have to stop working without pay.
As a sole trader, having income protection should be a priority, as state benefits are typically modest and insufficient to maintain anything close to the lifestyle of a Barrister.
Rachel Bale, Barrister at 3PB and Founder of Her Bar, commented:
“The greatest reward of being self-employed is the flexibility with your time, however, the biggest drawback is the lack of financial protection when illness, bereavements or personal matters take you away from your working capacity.
Having recently transitioned from Pupil to Tenant, I initially thought it was too early to consider “income protection” insurance products and was concerned that the costs would be too much given my early stage at the Bar. But having used Henry Dannell’s quick quote calculator I realise the monthly costs are very affordable and the peace of mind it provides, should tragedy strike down the line – is invaluable. I also consider it best to get into ‘good habits’ early on, paying a little each month to help protect the “future you”.
How does Income Protection work for me as a Barrister?
When does it Pay out?
If you are unable to work due to illness or injury you will be entitled to claim on your income protection policy. You will have to prove that you are unable to work (via your doctor) and provide evidence of your income. If you have a deferred period within your policy, it will be at the end of this that it will pay out.
How long does it pay out for?
The benefit pay-out term can be short-term or until a selected age, so if you plan to retire at 70 you can have a payout term to match.
In the case of short-term income protection, you can have a benefit payment period of 1, 2 or 5 years. You will be covered until your selected retirement age and you can claim multiple times, however, the claim will be paid for either 1, 2 or 5 years.
As a Barrister you should always have the full payment period option, however, if you are on a budget, then the short-term periods are there for affordability.
Waiting/Deferred period – what is it?
The deferred period is how long you can wait before you need to claim. The general rule of thumb is the shorter the waiting period, the more expensive the policy.
As a Barrister you have to take into account that you may still be receiving income for some time after you are incapacitated due to illness or injury, insurance providers will cover between 50% and 70% of your gross income, and this applies at the claim stage.
Therefore, the advised deferred period for a barrister will most likely be a minimum of at least six months. This is good news for barristers as the policy cost of a 6-month deferred period is far less than a 1-month deferred period.
How much cover should I have?
It may be that taking out the maximum amount (50%-70% of your gross annual income) of cover is a good idea, depending on your situation and circumstances. However, it is important to note that this will increase the cost of your monthly premiums.
If cost is a concern, then the best solution is to cover your essential expenditure as a starting point. This will also ensure that you are not over or under-insured. You can also index your cover so it keeps up with inflation.
If your income or outgoings increase dramatically later down the line, you can always arrange an insurance review and amend your cover.
How can I get Income Protection?
Getting the right policy requires bespoke, specialist advice. Using a specialist insurance broker will offer you access to whole of market insurers, and will save you the time and stress of comparing the market for the best policy for you. This is particularly important if you have any pre-existing medical conditions.
If you wish to arrange an income protection policy or review existing cover, we would be happy to assist.
To arrange your consultation, click here or contact us on 0204 5999 444.
Please note: Income protection (with no investment link) has no cash in value at any time and will cease at the end of the term. If you stop paying premiums, your cover may end.
