Do you need income protection in the cost of living crisis?
Countries around the world are reporting substantial increases in the prices of food, housing and fuel, in a cost of living crisis. As many people tightening their purse strings as financial pressures pile up in this era of post-pandemic uncertainty, income protection can be more valuable now than ever. It provides a safety net if something goes wrong and you are unable to work.
Here we explain how income protection works and why this type of cover is worth considering for those living the expat lifestyle, even during the cost of living crisis.
Is income protection worth it?
The aftermath of the COVID-19 pandemic and the impact of the war in Ukraine on food and energy supplies have combined to fuel a cost of living crisis. Inflation is surging both in advanced economies and developing countries: the International Monetary Fund predicts average price increases of 5.7% in developed countries over the course of 2022, and 8.7% in developing economies. And of course, many countries are experiencing much steeper price rises.
With this backdrop, it’s not surprising that some people are seeing insurance products, such as income protection, as areas where they could cut back on their spending.
A survey by UK financial services company Royal London reveals that in the UK, 9 in 10 adults are considering making changes to pay their living costs. And 11% are considering reducing or stopping protection premiums. But this may well be a mistake.
In the case of income protection, the very fact of high inflation means it could be extremely difficult to maintain your lifestyle if you were unable to work. Therefore, having provision in place for such an eventuality is even more vital during times of crisis and uncertainty.
Income protection insurance, sometimes called permanent health insurance or salary protection insurance, can provide a regular monthly income if you are unable to work because of sickness or disability. This can help cover your regular living costs, including your rent or mortgage.
This type of insurance doesn’t pay your whole salary, but rather a proportion of it while you recover from your illness.
- choose a plan which pays up to 80% of your salary
- claim if you’re unable to work for more than 3 months because of illness or injury
- choose a longer deferment period of 6 months, which can lower the cost of a policy
There is usually a waiting or ‘deferment period’ before you can make a claim on your income protection insurance. This is because you may have sick pay from your employer or be able to claim state benefits for the first few months of being unable to work.
Income protection insurance can help you avoid serious financial hardship. Here are 6 reasons why you should have income protection in the cost of living crisis:
1/ You have people who depend on you
If you have people who depend on you financially, having income protection can give you peace of mind that their needs – as well as yours – will be covered if you become unable to work because of illness or injury.
2/ You are self-employed
If you are self-employed, you won’t have access to sick pay from an employer, which means you could face serious difficulties if you’re unable to work and don’t have some form of protection in place.
3/ You may not be eligible for state sickness benefits
As an expat you may not be eligible for sickness benefits from the state. Even if you are eligible, these benefits may be very limited. For example, in the UK statutory sick pay is just £99.35 per week for 28 weeks.
4/ Your employer sickness payments might not be enough
Sickness payments from employers are variable. Some are very generous and some less so. However, even if employer sick pay is reasonable, it may not last for very long. Depending on the policy, income protection can pay until you are able to return to work.
5/ Protect your savings
Not having income protection insurance may mean you need to dip into your savings to cover living costs if your illness persists for some time. This could leave you financially vulnerable if another emergency arises.
6/ Think carefully before cancelling
If you already have an income protection policy, it’s wise to give careful consideration before cancelling. Buying a new policy when you’re older could be more expensive.
What makes a good expat income protection policy?
When shopping around for an expat income protection policy to suit you or your employees, look for factors such as these:
- Maximum salary value – at William Russell, our International Income Protection benefit payments cover individuals for up to 80% of their full salaries, up to a maximum value of US$144,000. Our benefit payments are also inflation-locked, meaning they will always increase at a compound rate of 2% year-on-year
- Monthly premiums – your repayments are likely to be affected by your age, the amount of cover you need and, in some cases, your health
- Eligibility requirements – many providers stipulate a maximum age, a minimum level of health and will pay attention to the type of labour a worker fulfils. At William Russell, you are eligible so long as you are over 18 and under 60 in good health and work a non-hazardous occupation, usually an office-based job, and not living in one of our excluded countries (Iran, North Korea, South Sudan, Libya, Syria, Yemen, Switzerland)
- Length of term – if you choose international short term disability insurance, this typically pays out for a period of up to two years. Our payment of benefit continues until you return to work, die or reach the age of 65 – we do not cap the total amount you can receive during this time
There are ways to potentially make savings on your income protection cover.
- If you already have an income protection plan, review your level of cover. You may now have a job with better sick pay, or have paid off more of your mortgage, for example, so you may be able to reduce the amount of cover you need
- You may also be able to build up your savings and extend the deferment period, which can make your policy cheaper
- Tailoring your plan to suit you can help you get the cover you need – stay within budget and have that all-important safety net in case the unexpected happens
How much does expat income protection with William Russell cost?
The indicative prices below give you a ballpark figure for how much cover might cost:
Expat income protection insurance with William Russell
|From US$81 per month|
Indicative price for a 30-year-old living in Singapore covering their salary up to US$50,000 (6-month deferment period)
|From US$118 per month|
Indicative price for a 45-year-old living in Hong Kong covering their salary up to US$50,000 (6-month deferment period)
We can also cover groups of employees.
Frequently asked questions about expat income protection insurance
Here are some of the most commonly asked questions about expat income protection and insurance plans from William Russell:
When you are applying for cover think about:
- how long your employer would continue to pay you
- how much they would pay you as sick pay
- any other income you would be entitled to, such as income from the state, or payments from another insurance company.
You can insure up to 80% of your annual earnings, but if you make a claim, the amount we would pay you would be the lower of:
- The amount you have insured, and
- 80% of your pre-disability annual earnings, minus any other income you are entitled to, such as state benefit, sick pay, or payments from another insurance plan.
So the amount you can claim will be reduced if any other income plus the income you have insured, are more than 80% of your pre-disability earnings.
If you are self-employed and your earnings fluctuate, we will use your average earnings over the three-year period before your last day at work.
In most cases, we can only provide income protection to expats. By expat, we mean people living and working outside of their country of nationality (e.g., a German national living in Thailand, an American national living in Chile).
Typically, our members reside permanently in a foreign country. But we can sometimes provide income protection to people expecting to spend at least 6 months of the year living or travelling abroad.
In certain countries, we can cover people living in the same country that issues their passport. These countries are Botswana, Kenya, Nigeria, Mauritius, Estonia and Malawi.Learn more about expats
Absolutely! You can apply for expat income protection insurance through the same process as an employed person.
If you are self-employed and your earnings fluctuate, we will use your average earnings over the three-year period before your last day at work as the basis of your usual income. You can then apply for expat income protection insurance as normal.
As soon as you know you are likely to be off work for longer than your deferment period, contact us for a disability claim form.
We will then contact the doctor who is treating you to get the information we’ll need.
Once your claim has been assessed and agreed, and your chosen waiting period ends, your income payments will start. No income will be paid during or for the waiting period.
If, after becoming eligible for income from your plan you return to work then suffer a relapse within six months, your payments will re-start immediately.
You won’t have to go through another waiting period.make a claim
With our plans there’s often no need for a medical exam or reports.
If you are under 50, fit and healthy, and applying for cover of less than US$75,000 we may be able to offer you cover straightaway. Otherwise, we’ll let you know if we have any medical requirements. If we do, you can go to a nearby clinic to get your exam done, and we will reimburse you once your policy starts.
Don’t leave anything to chance. Choose total peace of mind instead.
How do you choose a partner to help you settle into your new life overseas? We recommend choosing one with 30 years’ experience providing insurance exclusively to expatriates like you.
At William Russell, we go the extra mile to make sure our members are not only kept safe but get to enjoy the highest quality of life possible overseas. Our dedicated account managers are famous for their highly personalised service, and making a claim is as easy as filling in an online form.
Things sometimes go wrong. But when you choose William Russell as your provider of international income protection insurance, you’ll know you’re in the safest possible hands. Speak to us today to find out more about expat income protection insurance for individuals and for businesses.