Reviewing your 2013 finances? Don't forget income protection

Tis the season to be jolly, rack up loads of credit card debt and have a close look at your household finances to ensure you’re better off in 2013 than you have been over the past 12 months.

The end of the year is the time when many of us take the chance to review our spending, making new year’s resolutions to be more thrifty and top up our pensions. But while you’re counting the pennies and trying to cut costs, there is one thing that you should definitely be shelling out for: income protection.

For those not in the know, income protection is an insurance policy that pays out a monthly income it you can’t work because of illness or injury. Many people have mortgage protection insurance to cover their mortgage if they can’t work but what about all the other day-to-day costs of living?

Income protection means that you’ll be able to cover your food bills, heating bill and MOT for the car.

None of us like to think about not being able to provide for our family and most of us believe that ‘it won’t happen to me’ but the truth is that one in five people go on long-term sick leave during their working life.

And for those who think that the government will look after them, think again. According to insurance broker Drewberry, government support amounts to just £5,200 a year on average, or £100 a week, which won’t cover most people’s bills.

The government can’t afford to put its hand in its pocket so we’re going to have to cover our own backs. Drewberry has launched a campaign to help promote income protection and show you just how much of your monthly expenditure is at risk by failing to put in place this straightforward and relatively inexpensive product.

You can check out the campaign and tools on the Drewberry website.

Illness and accidents do not discriminate and details of real life claims from insurer LV= shows the important of income protection:

A 31-year-old male carpet fitter who was brain damaged in a traffic accident has claimed £303 a month for 15 years, a total of £55,449 so far.

A 43-year-old male accountant who had a cyst removed from their brain has claimed £3,194 a month for the past seven years, totalling £255,520 so far.

A 46-year-old female vet who has arthritis has claimed £369 a month for the past 12 years, totalling £51,291.

These stories are a depressing reality but income protection can stop them being a financial disaster. So when you’re looking at your budget for 2013, think about how your family would cope if you couldn’t work. Times are tight but there are some things that are worth paying for, and peace of mind is one of them.