Since the pandemic began, growing numbers of women have been buying policies that will pay out during long-term sickness or unemployment. This is a wise move.
Everyone knows they need to insure their car, their home and anything precious, from pets to bicycles.
But the pandemic has sparked increased interest among women in another kind of insurance – policies that ensure individuals and their families can meet their financial commitments if the worst happens, called income protection.
The breakout of the COVID-19 pandemic was a classic example of what’s known as a ‘black swan’ – the sudden appearance of something that’s previously considered unlikely, but that has severe and long-lasting consequences when it does arrive.
The human cost has been incalculable, with millions of lives touched by death, illness and job losses. The profound uncertainty ushered in by the coronavirus has affected every aspect of our lives: whether our children can go to school, when we’ll see relatives, if we can plan holidays or celebrations.
More than 18 months since the virus emerged, it’s still difficult to gauge whether or when our lives will return to ‘normal’.
Amid the struggles, many people have had more time to reflect on what matters most to them and make changes for the better. For some, this has meant turning to protection insurance and taking out policies that would pay their mortgage and living costs or support their loved ones if another black swan appears. Investing in these policies has been a sensible way for people who built up extra savings during the lockdowns to put their money to work.
It’s no surprise that greater numbers of women have looked to protect themselves from future financial knocks. At the start of the pandemic, the Organisation for Economic Co-operation and Development (OECD) warned that women’s jobs, incomes and businesses would be more badly affected than men’s – a trend seen during other pandemics2.
These predictions were realised in Britain, as women were the majority of those on the government’s furlough scheme, while 57% of workers in industries forced to shut down were female3. The burden of unpaid labour also increased, with women largely relied upon to look after children when the schools closed.
What if I already have savings?
The pandemic has made people realise that their income is vital and has revealed the value of protection insurance. Although many people have already prepared a will and have savings or other assets earmarked for their family should the worst happen, often cash savings will not cover the full cost of long-term illness.
Meanwhile, having to sell investments such as shares or property in a rush to meet unforeseen outgoings is both stressful and risky, as it can mean accepting less for your assets than you hoped for.
It’s also a problem for when you have recovered, as those diminished savings and assets have to be replaced but at potentially higher prices than you initially paid for them. Executing a will can also be a lengthy process, which may leave family unsupported financially for months or years.
What should women consider with protection?
When buying insurance, most people think about the cash value of their possessions – how much it would cost to replace their car or smartphone, for example. But when buying income protection, women need to think about the value of the unpaid work they do alongside their salary, including household chores. If you have young children, you also need to think about childcare.
If you were ill for an extended period of time, how much would childcare cost? You would need to factor in future expenses, too; for example, the extra-curricular activities that children will be involved in once they reach secondary school.
Income protection is especially important for part-time workers (the majority of whom are women) and the self-employed, as during periods of economic crisis, these jobs are often lost. Sometimes, the main earner in a household has an income protection policy, but the partner on a lower salary or working part-time should also be covered.
There is a wide range of protection policies available to cater for every kind of personal circumstance. Before opting for one, it’s important to speak to a financial adviser to assess your financial liabilities and ensure you have the right insurance for your needs.
If you are looking for income protection, we can help you choose the best policy for your circumstances.
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