There is an interesting correlation with private medical insurance here in that if you choose to go private you don’t lose access to the NHS. But there are some situations for lower earners where buying Income Protection could potentially impact the benefits they receive.
Commenting on the role for IP, Nick Telfer, head of product and proposition at insurer British Friendly, says: “As pressure on the welfare system grows, benefits become more focused on those members of society who are unable to provide for themselves. This means that it is increasingly important that those who are able to afford to insure themselves do so.
"This serves two main purposes: it gives those people greater control by allowing them to create a protection solution that reflects their own situation, while allowing state benefits to be focused on those who are unable to provide for themselves.
“The role of advice is to put our customers in a position where they are no longer solely reliant on the state and can be self-sufficient in times of need. The complexity of state benefits as we move towards a new era with Universal Credit could be regarded as a deterrent to advisers advising on IP.
"In fact it’s the opposite. Application and qualification for state benefits is a lengthy process with no certainty of receiving benefits. This is a major reason why income protection is more important now than it’s ever been."
That said, in some cases where there are question marks over the potential impact of IP on benefits, it might be advisable to call on expert help and advice.
Gareth Morgan of Ferret Information Systems, experts in welfare benefits and advice tools, comments: "The welfare benefits system is complex and has been made more so by recent changes. Although IFAs need to be aware of this, it might be wise to call on expert advice in this field, or to use dedicated tools in more complex cases, especially when considering the potential impact of certain protection products on means-tested state benefit entitlements."
Click here to read part two which looks at a number of other related issues, including Statutory Sick Pay, Employment and Support Allowance, Support for Mortgage Interest, Personal Independence Payment, Bereavement Allowance, Industrial Injuries Disablement Benefit and the Impact of IP on means-tested benefits.
The following welfare charities provide support and tools which advisers may find useful:
- Turn2Us at www.turn2us.org.uk
- Entitled To at www.entitledto.co.uk
Kevin Carr is chief executive of the Protection Review
