Welfare Pay-out Cuts – Are You Prepared?

Posted on: 2012-06-25 | 09:40:01

The press over the weekend and today has been full of it. The Prime Minister Mr. David Cameroon is to call a debate on the welfare systems and the two areas that will be impacted in particular are the people on housing benefit less than 25 years old and time limiting the ones on job seekers allowance. The suggestions also included that people on job seekers will have to prove every time they claim that they have tried their best to secure jobs and ones that have been on job seekers for over two years without a job to be put on community service. While parallels have been drawn on the model followed in USA and moral questions raised on whether people without jobs should be having 3 children for instance, the overhaul of the benefit and welfare system can have far reaching impact on our day to day lives.

Kesh Thukaram, Director of Best Insurance says that the people in USA display different behaviour when it comes to managing joblessness. In a survey that was recently concluded, people highlighted that income protection insurance was one of the top 3 things people spend their money on. In the UK, while there are several leading providers of income protection insurance, neither the brokers nor the customers tend to treat it with the same sense of urgency. This is partly to do with the way the benefit systems work in the UK and people tend to be in false sense of complacency as heading to the job centre tends to be the most favourable option for most.

Income protection insurance protects for loss of income against unemployment, accident and sickness. The short term income protection has benefit periods of 12 to 18 months and the long term income protection has benefits periods that last until the age of 65 years when it comes to loss of income due to accident or sickness. The Governmentís initiative on simplifying these product sets and brining in transparency means that very soon there will be more providers in this market. Currently there are about 15 specialist income protection insurers and about 30 income protection product providers. This is bound to increase as more and more people will look to insure themselves and not depend on the Government benefits.

While what the Government suggests may never see the light of the day and will almost certainly be riddled with several examples of needy families and emotionally charged discussions, what one cannot do is to ignore the reality. The reality is that Government cannot afford financially to baby sit and the ageing population is yet another factor which will make it more urgent to bring in these reforms. Hence while the sector is still nascent, getting a good income protection insurance on fixed pricing basis is certainly worth exploring.