Income protection: Why more women are investing in it

The COVID-19 pandemic has sparked increased interest among women in taking out policies that will pay out during long-term sickness or unemployment. It’s a wise move – and one you should certainly consider. Here’s why!

Overview:

  • ‘Protection’ refers to insurance policies that help people and their families meet their financial commitments should they face long-term sickness or unemployment, or if they die. Policies include critical illness cover, life insurance, income protection and mortgage protection.
  • The pandemic has seen a sharp uptake in the number of women taking out life insurance, reflecting the growing desire for financial security in times of economic crisis.1
  • Speak to a financial adviser to help you opt for the best policy for your personal circumstances.

From cars to homes, and anything precious – such as pets and bicycles – everyone realises the value of insurance.

However, the pandemic has stimulated increased interest among women when it comes to another kind of insurance – policies that guarantee individuals and their families can meet their financial commitments in the worst-case scenarios, called income protection.

The coronavirus pandemic has been a typical example of a ‘black swan’ – namely, something that was previously considered unlikely, but which can suddenly manifest with critical and long-term repercussions.

It’s impossible to calculate the associated human cost from the outbreak, as millions of lives have been affected – from illness and job losses to death. The deep uncertainty surrounding COVID-19 has touched every element of our lives – whether our children can go to school, if and when we can see our relatives, and whether we can go ahead and plan holidays or other celebrations.

And now here we are, more than 18 months since the virus broke out, and it continues to be difficult to determine any kind of return to ‘normal’ as we once knew it.

In and amongst the low points, many individuals have found they’ve had more time to truly contemplate their life priorities, and make changes for the greater good. For some people, this has resulted in turning to protection insurance and taking out policies that would pay their mortgage and living costs, or support their loved ones in the instance of another ‘black swan’. Investing in such policies has been a wise move for those who built up extra savings over the lockdown periods to put their money to work.

Little wonder that more and more women have sought to protect themselves from future financial shocks. At the beginning of the pandemic, the Organisation for Economic Co-operation and Development (OECD) warned that women’s jobs, incomes and businesses would be more severely impacted than men’s – this mirrors the trend seen during other pandemics.2

These forecasts were realised in Britain, as women made up the majority of those on the government’s furlough scheme, while 57% of workers in industries forced to shut down were female.3 The stress of unpaid labour likewise increased, as women were broadly largely relied upon to care for and home-school children when educational establishments were forced to close.

Already have savings?

This tumultuous time has meant that people now understand the value of their income, revealing the importance of protection insurance too. Indeed, while many people have already executed a Will and have savings or other assets set aside for their family should the worst come to the worst, cash savings might not necessarily cover the full cost of long-term illness.

In the meantime, having to sell investments (such as shares or property) in haste, in order to meet unforeseen outgoings, can be both draining and risky. After all, it can mean accepting less for your assets than you had hoped for.

It’s also problematic once you’ve recovered, as those diminished savings and assets have to be replaced, but potentially at higher prices than you paid at the outset. What’s more, preparing a Will can be a lengthy process, potentially leaving your family financially unsupported for months or even years.

What should women consider with protection?

When it comes to buying insurance, most people focus on the cash value of their possessions i.e. how much it would cost to replace their smartphone or car, for instance. However, when buying income protection, women should think about the value of the unpaid work they do alongside their salary, including household chores. And, if you have young children, think about childcare too.

If you were to fall ill for an extended period of time, how much would you have to pay for childcare? Future expenses would need to be factored in, too – such as the extra-curricular activities that children will likely be involved in once they start secondary school.

Income protection is particularly important for part-time workers (the majority of whom are females) and the self-employed. After all, during periods of economic crisis, these jobs are often lost. It could be the case that the main earner in a household has an income protection policy, but the partner who earns less or works part time should also be covered.

There are a number of protection policies available to cover every kind of personal circumstance. Before you make your decision, first speak to a financial adviser so that your financial liabilities can be assessed and you can be sure you have the right insurance for your individual needs.

Are you looking for income protection? Don’t hesitate to speak to your Wellesley adviser today – we’re here and ready to help you select the best policy for your circumstances.

Sources:

1 A more inclusive protection market, iPipeline Quarterly, iPipeline UK, November 2019
2 OECD Policy Responses to Coronavirus (COVID-19): Women at the core of the fight against COVID-19, Organisation for Economic Co-operation and Development, 1 April 2020
3 How has the coronavirus pandemic affected women in work?, House of Commons Library, 8 March 2021

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