The cost of illness

Illness and work

Protecting your finances

Protecting your finances

The information in this guide was last updated on 26/02/2014

There are several ways you can take steps to protect your finances if something happens to you.

Rainy day money

If you can save, it’s a good idea to have enough to cover three to six months’ of essential outgoings in an instant or easy access savings account. See building a safety net.

Critical illness insurance

This type of insurance pays out if you’re diagnosed with one of the illnesses or injuries listed on the policy. (Not all illnesses are covered by critical illness policies.)

You can use the money for whatever you like, including paying off the mortgage or modifying your home. This insurance can be useful if you have little in the way of savings, or if you're not covered by your employers sickness package.

Income protection insurance

Income protection insurance gives you an income if you become unable to work because of illness or injury and suffer a loss of income. Policies offer different levels of cover, so it’s really important to choose the one that’s appropriate for your needs.

  • The highest level of cover is own occupation. If you choose this, your policy will pay out if illness or injury stops you doing your own occupation.
  • Suited occupation cover will pay if you can’t do any job that your qualifications and skills make you suited for.
  • Any occupation policies will only pay if you’re deemed incapable of doing any job. 
  • Incapacity test policies will only pay out if you are unable to undertake a number of tasks from the list of activities.

Short-term income protection insurance

This insurance can help you keep up the payments on your outgoings for a short period of time if you’re made redundant or become too sick to work. They last for about 12 months. 

Life insurance

If you have dependents, you may want to take out life insurance. This insurance pays out if you die within the term of the policy, but it won’t pay if you become ill or have an accident unless it’s combined with critical illness cover. 

Mortgage life insurance

This could be used to pay off your mortgage if you die during the term of the policy.

Getting help

Help for people with serious illnesses is available, both from the government and from charities.

Benefits are available to give you financial support if you’re unable to work; the main one is the Employment and Support Allowance (ESA).

The Personal Independence Payment replaced the Disability Living Allowance in 2013. You can claim if you have difficulty with some of the tasks involved in daily living, or if you have problems going out or moving around.

If you need more than 14 items a year, a prepayment prescription certificate (PPC) can make paying for prescriptions cheaper. It covers you for all NHS prescriptions, no matter how many you need, and costs £104 a year.