No one wants to have it until it is too late to have it
Every September, the commitments arrive together.
The autumn term invoice lands. The uniform costs more than it did last year and less than it will next year. The new season of clubs, trips and kit starts billing. The mortgage goes out as it always does. The car needs something. Somewhere in the middle of that week you sit down, look at the standing orders, and register that this is now the shape of your life for the next ten years or so, and that all of it, every line, rests on a single assumption.
The assumption is that your income continues.
Not that it grows. Not that the bonus is good. Just that it continues, uninterrupted, month after month, for another decade.
Most people in their forties have never stated that assumption out loud, which is why they have never tested it.
What you probably think you have
Ask a senior professional what protection they have in place and the answer is usually some version of: I have cover through work.
That answer is worth unpacking, because it is doing a lot of work in most people’s heads and rather less in practice.
Death in service is the most common workplace benefit, typically a multiple of salary, often four times. On a substantial salary that produces a number large enough to sound like a solved problem. Set against twenty remaining working years, a mortgage, and two children who have not yet started university, it is considerably less than it sounds. It is also, in most schemes, calculated on basic salary alone, which for someone whose total compensation is heavily weighted towards bonus and long-term incentives means it covers a fraction of what the household actually lives on.
Income protection through an employer is far less common than people assume, and where it exists it is frequently capped, time-limited to two or five years, and again calculated on basic pay.
Below all of it sits statutory sick pay, which is measured in the low hundreds of pounds a month and is not a plan.
But the detail that matters most is the one almost nobody thinks about: every one of those workplace benefits stops on the day you stop working there.
They protect you while you are employed. They do not protect you against ceasing to be employed. That is not a flaw in the schemes. It is simply what they are. It does mean that the cover most people are relying on evaporates at precisely the moment their exposure is greatest.
The three things that actually happen
There are only three events worth building around, and they are worth naming plainly rather than dancing around.
- You die. The household loses its income and gains an immediate set of costs and decisions. Whether that is a catastrophe or a manageable grief depends entirely on arrangements made beforehand.
- You become unable to work, through illness or injury, for months or years. This is statistically the most likely of the three and the one people insure against least.
- You lose the role. Restructures, mergers and strategic reviews do not check whether your children are mid-GCSE. The market for people at your level is usually robust, but robust is not the same as immediate: six to twelve months out is common.
The first two are what people mean by protection. The third is what people mean by a cash buffer, and it belongs in the same conversation, because the household experiences all three identically: the money stops and the commitments do not.
Why this conversation gets deferred
It is not cost. The premiums involved are, for someone in this income bracket, a rounding error against the monthly outgoings, usually less than the household spends on things nobody would defend if pressed.
It gets deferred because it requires you to picture a version of your life you have no wish to picture. Sitting down to arrange income protection means spending an afternoon imagining yourself unable to work. Arranging life cover properly means thinking carefully about your family managing without you. These are not administrative tasks. They are small acts of imagination that most people, understandably, would rather not perform on a Tuesday evening.
So the conversation gets pushed to next month, and next month it gets pushed again, and the deferral is invisible because nothing happens to mark it. Nothing happens for years. Until something does.
The people we work with who have this in place did not arrange it because they were more disciplined or more anxious than everybody else. They arranged it because someone sat down with them and asked the question directly, and then stayed in the room while they answered it.
What it looks like when it works
One of our clients, whose story is told in full elsewhere in his own words, put income protection in place in the first year of his plan. He did not want it. He described it later as the easiest thing in the plan to cut, and he came close to cutting it more than once. It cost him a few hundred pounds a month against a total compensation package well into six figures.
In year six, at forty-seven, he was told by a consultant to stop working. Treatment and recovery ran to months rather than weeks, and there was no honest way to work through it.
Statutory sick pay is what it is. After that, the salary he had built the household around simply stopped. The income protection began at the end of its deferred period and replaced the bulk of his income until he was well enough to go back. The cash buffer covered the months in between. What he did not have to do, across those eight months, was sell investments at a bad moment, raid his pension, or borrow. He and his wife did not have a single argument about money in the whole period.
He has described the afternoon he was told to stop working. He felt frightened. He felt guilty: for the hours, for having ignored every warning sign for a year. And underneath both of those, unexpectedly, he felt that the plan was going to hold.
That feeling is the entire product. Everything else is administration.
Note which of the three events that was. Not the one people picture when they think about protection, and not the one they fear most. The middle one: the one that is statistically the likeliest, and the one almost nobody insures against.
What to do about it
You do not need to arrange anything this week. What is worth doing this week is establishing what you actually have, as opposed to what you assume you have.
Find out what your death-in-service multiple is and whether it is calculated on basic salary or total compensation. Find out whether you have employer income protection at all, and if so what it pays, for how long, and after what deferred period. Work out how many months your household could run on cash alone if income stopped tomorrow. Check when you last looked at your will, and whether it still describes the family you have now rather than the family you had when you wrote it.
Most people who do that exercise are surprised, and not in the direction they expect. The gap is usually wider than assumed and cheaper to close than feared.
If you would rather not do it alone, that is the conversation we have. It is not a sales meeting. We will tell you honestly what we think, and whether we think we can help.
Where this fits
This article sits alongside a longer piece: the story of one of our clients across ten years, told in his own words. It starts on a Sunday in November, with him looking at his banking app and realising he had no plan at all. It includes the illness described above, the eight months out of work, and where he ended up: on track for financial independence at fifty-eight.
It is the clearest illustration we have of why the boring decisions turn out to matter most.
You can read it here: “Ten years, two holes and a plan”.
If you would like to have the conversation, please get in touch.
This article was written by Phoenix Wealth Management for senior employees and professionals in their forties. Phoenix Wealth Management is authorised and regulated by the Financial Conduct Authority. This article does not constitute personal financial advice. The suitability of any protection arrangement depends on individual circumstances. Past performance is not a guide to future performance. The value of investments can go down as well as up.
