“If you have an income and no income protection insurance, you’re potentially putting everything at risk.” This stern warning comes from none other than Martin Lewis, the UK’s most famous money-saving expert. With his signature blend of financial savvy and empathy, Lewis has been sounding the alarm about the importance of income protection coverage.
Who is Martin Lewis?
For the uninitiated, Martin Lewis OBE is the founder of the wildly popular MoneySavingExpert.com website and a ubiquitous voice of consumer advocacy in Britain.
His weekly newsletter reaches over 7 million subscribers, his television shows draw massive audiences, and his financial guidance books have sold millions of copies.
But beyond the staggering numbers, it’s Lewis’ down-to-earth relatability and genuine concern for helping everyday people that has cemented his reputation.
His mission is simple: “To cut bills without cutting throats.” And when it comes to income protection insurance, Lewis firmly believes it’s one of the most crucial coverages people are overlooking.
Read more if you want to know: Does Martin Lewis Recommend Life Insurance?
What is Income Protection Insurance?
At its core, income protection insurance (also called permanent health insurance or PHI) is designed to pay out a portion of your income if you become unable to work due to illness or injury.
Unlike critical illness cover which only pays out a lump sum for specific conditions, income protection insurance keeps paying as long as you can’t work.
The key benefits are:
- Replaces Lost Income: Typically pays out 50-70% of your gross income, helping cover essential living expenses.
- Long-Term Protection: Can continue paying out until you retire, not just for a fixed period.
- Tax-Free Payments: Since you paid premiums from taxed income, the payouts are tax-free.
- Flexible Policies: You can tailor the waiting period before payouts start and payment periods.
With the potential for a prolonged illness or injury to deplete savings rapidly, Martin Lewis wholeheartedly endorses Income Protection Insurance as a vital safety net, saying “It’s the one insurance most should consider.”
Martin’s Stance: An Essential Financial Lifeline
“If you have an income and no income protection insurance, you’re potentially putting everything at risk. For me, it’s an amazingly important insurance.” – Martin Lewis
Lewis’ passionate advocacy for income protection stems from his own familiarity with the vulnerabilities hard-working families face.
Despite the UK having a social safety net, Lewis stresses that “Employment and Support Allowance is just £73 per week for many, which for some won’t even cover household bills let alone living expenses.”
| Government Benefits (£/week) | Income Protection* (£/month) |
|---|---|
| Employment & Support Allowance: £73.10 | £1,500 income: £750 |
| Universal Credit: £334.91 for family of 4 | £2,500 income: £1,250 |
| Statutory Sick Pay: £94.25 | £4,000 income: £2,000 |
*Based on 60% payout rate after 6-month waiting period
As the table illustrates, the payments provided by Income Protection Insurance can be a vital lifeline compared to basic government benefits alone. This aligns with Lewis’ pragmatic belief that “We are extraordinarily bad at insuring ourselves against potential financial catastrophes we can’t afford.”
Even for those who have built up savings, Lewis cautions that a prolonged inability to work could quickly deplete those reserves:
“A huge proportion of people would burn through their savings rapidly if sick, after all a salary of £28,000 is around £2,200 per month – so six months of being too ill to work is already £13,200 of spending money needed from savings.”
Real-Life Cases: When Income Protection Paid Off
To drive home the value of income protection, Lewis frequently cites real-life examples of people whose policies made all the difference, like Alison’s story:
“Eight months after taking out income protection insurance, Alison was signed off work with a rare genetic brain condition causing black-outs and memory lapses. For three years she was unable to work at all….During that time her income protection paid her £1,500 per month.”
Or Dave’s experience after developing a brain tumor:
“Less than two years after taking out the policy I sadly developed a brain tumor….Unable to work and having spent some time in hospital, the income protection policy payments have been a lifeline, ensuring my wife and children have been able to stay in our home.”
These powerful anecdotes are more than cautionary tales. For Lewis, they exemplify why “Income protection insurance is one of the most important insurances there is, especially for those with dependents.”
Finding the Right Policy: Lewis’ Top Tips
Of course, not all income protection policies are created equal. Lewis recommends “Goldilock-ing” the search to find the right balance of affordable premiums, sufficient coverage, and credible providers. His key tips include:
- Evaluate Your Needs: Think about what income you need to cover essential expenses, and how soon you’d need payments after falling ill. This determines your desired payout amount and waiting period.
- Choose ‘Own Occupation’ Coverage: Avoid cheaper policies that only pay out if you can’t work any job. You want a policy covering YOUR specific occupation.
- Compare Premiums & Reviews: Use comparison sites, but don’t just choose the cheapest policy. Read reviews and check financial strength ratings.
- Consider Adding Inflation Protection: For long-term claims, a policy increasing payouts with inflation is valuable though costlier.
- Extend Your Work Benefits If Possible: See if you can pay to convert workplace group coverage into an individual portable policy if you leave.
Martin also strongly recommends most people opt for an ‘Guaranteed Premiums’ policy where “the insurer is never able to increase the premiums you pay, though you’ll need to pass a new medical exam if you significantly extend the cover.” This protects against rates spiking uncontrollably.
Overcoming Common Objections
Even with Martin Lewis’ passionate advocacy, income protection is still vastly under-appreciated in the UK. He frequently confronts the common objections and misconceptions:
“It’s too expensive” Lewis counters that costs can be surprisingly affordable if you shop around, with a typical 30-year-old potentially paying £20-£40 per month for a basic policy. And isn’t that a small price to pay for protecting your greatest asset – your ability to earn an income?
“I’ve got savings, why bother?” Even substantial savings can quickly get depleted without an income stream coming in. Lewis reiterates that “Savings are for short-term costs, insurance is for long-term predicaments you hopefully never face.”
“It’s not worth it, they never pay out” Using regulatory data, Lewis debunks this myth showing that “income protection insurers pay out around 86% of claims,” much higher than many realize.
“I’m young, fit & healthy, so I don’t need it” Unfortunately, Lewis responds, “no one is immune to the luck of ill health.” Conditions like mental health issues, back problems, cancers, and strokes can happen to anyone and derail careers at any age.
The Money Saving Expert’s Bottom Line
At the end of the day, Lewis’ unwavering advocacy boils down to the simple fact that “income really is our greatest asset and it needs protecting.” Without this crucial insurance in place:
“If you’re employed and you fall severely ill and cannot work for an extended period, you’ll likely find your outgoings very quickly swamp your incomings, as the cash dries up….I’ve long said that for many, income protection is the most important insurance of all.”
With his trademark blend of statistics, stories, and straight-talk, Martin Lewis has made income protection insurance one of his signature crusades. And the core of his message couldn’t be more clear:
“Do not put your income at risk. It’s one of the biggest gambles to take, and one that could be utterly devastating if it went against you.”
In an uncertain world where the unthinkable can happen, heeding Lewis’ advice on income protection just might be the financial lifeline you never expected to need.
Daniel, a seasoned professional with over 5 years of experience in banking, property, and finance, brings a wealth of expertise to the table. This authoritative blog is meticulously curated to provide you with the most up-to-date financial insights. Delving into the dynamic realms of banking and mortgages, Daniel’s passion for finances shines through every post.
