Do you need income protection in the cost of living crisis?

People around the world are reporting substantial increases in the prices of food, housing and fuel, in a cost of living crisis.

Many people are tightening their purse strings as financial pressures pile up in this era of post-pandemic uncertainty, income protection can be more valuable now than ever. It provides a safety net if something goes wrong and you are unable to work.

Here we explain how income protection works and why this type of cover is worth considering for those living the expat lifestyle, even during the cost of living crisis.

Is it worth having income protection in the cost of living crisis?

The aftermath of the COVID-19 pandemic and the impact of the war in Ukraine on food and energy supplies have combined to fuel a cost of living crisis. Inflation has remained a global challenge in both advanced and developing economies. Over the past few years, inflation rates have fluctuated but often exceeded historical averages due to ongoing global economic pressures, supply chain disruptions, and geopolitical tensions.

The International Monetary Fund projects inflation to remain elevated, with developed countries facing average price increases of around 4–5% annually and developing economies experiencing rates upwards of 7–8%. In some countries, particularly those grappling with political instability or high import dependency, price rises have been significantly steeper.

With this backdrop, it’s not surprising that some people are seeing insurance products, such as income protection, as areas where they could cut back on their spending.

A survey by Royal London previously found that 9 in 10 UK adults were considering changes to manage their living costs, with 11% contemplating reducing or canceling protection premiums. Recent findings from the Financial Conduct Authority’s 2024 survey reinforce this trend, highlighting that many households are adjusting spending habits and reprioritising financial commitments to cope with ongoing financial pressures. But this may well be a mistake.

In the case of income protection, the very fact of high inflation means it could be extremely difficult to maintain your lifestyle if you were unable to work. Therefore, having provision in place for such an eventuality is even more vital during times of crisis and uncertainty.

How does income protection insurance work?

Income protection insurance, sometimes called permanent health insurance or salary protection insurance, can provide a regular monthly income if you are unable to work because of sickness or disability. This can help cover your regular living costs, including your rent or mortgage.

This type of insurance doesn’t pay your whole salary, but rather a proportion of it while you recover from your illness.

With international income protection insurance from William Russell, you can:

• choose a plan which pays up to 80% of your salary (up to a maximum of US$144,000)
• claim if you’re unable to work for more than 3 months because of illness or injury
• choose a longer deferment period of 6 months, which can lower the cost of a policy

There is usually a waiting or ‘deferment period’ before you can make a claim on your income protection insurance. This is because you may have sick pay from your employer or be able to claim state benefits for the first few months of being unable to work.

6 reasons to have income protection insurance

Income protection insurance can help you avoid serious financial hardship. Here are 6 reasons why you should have income protection in the cost of living crisis:

1/ You have people who depend on you

If you have people who depend on you financially, having income protection can give you peace of mind that their needs – as well as yours – will be covered if you become unable to work because of illness or injury. It means you won’t have to worry about how you’ll be able to feed the family or pay the bills, without seriously harming long-term financial health by dipping into your savings.

2/ You are self-employed

If you are self-employed, you won’t have access to sick pay from an employer, which means you could face serious difficulties if you’re unable to work and don’t have some form of protection in place.

3/ You may not be eligible for state sickness benefits

As an expat you may not be eligible for sickness benefits from the state. Even if you are eligible, these benefits may be very limited. For example, in the UK statutory sick pay is just £116.75 per week for 28 weeks, which is unlikely to be enough to support an expat family’s living costs for very long.

4/ Your employer sickness payments might not be enough

Sickness payments from employers are variable. Some are very generous and some less so. However, even if employer sick pay is reasonable, it may not last for very long. Depending on the policy, income protection can pay until you are able to return to work.

5/ Protect your savings

Not having income protection insurance may mean you need to dip into your savings to cover living costs if your illness persists for some time. This could leave you financially vulnerable if another emergency arises.

6/ Think carefully before cancelling

If you are thinking about losing the peace of mind provided by your existing income protection policy, why not contact our friendly, award-winning team to discuss the options available to you. If you lose your existing cover and decide to buy a new policy in the future, you may not be covered for any changes in health that have occurred since. Also, the amount you pay is based on age, so typically it becomes more expensive to secure the older you get.

What makes a good expat income protection policy?

When shopping around for an expat income protection policy, you should look for factors such as these:

• Maximum salary value – at William Russell, our international income protection benefit payments cover individuals for up to 80% of their full salaries, up to a maximum value of US$144,000. Our benefit payments are also inflation-locked, meaning they will always increase at a compound rate of 2% year-on-year.
• Monthly premiums – your repayments are likely to be affected by your age, the amount of cover you need and, in some cases, your health.
• Eligibility requirements – many providers stipulate a maximum age, a minimum level of health and will pay attention to the type of labour a worker fulfils. At William Russell, you are eligible so long as you are over 18 and under 60 in good health and work a non-hazardous occupation, usually an office-based job, and not living in one of our excluded countries.
• Length of term – if you choose international short term disability insurance, this typically pays out for a period of up to two years. Our payment of benefit continues until you return to work, die or reach the age of 65.
• Worldwide cover – if you’re living and working abroad, you’ll need a policy that covers you no matter where you are in the world—including when you’re travelling and making trips home.
• Excellent customer service – if you’re suffering from an illness, accident or injury that is preventing you from working, you want to be sure that dealing with an insurance company doesn’t add to your stresses. At William Russell, we pride ourselves on offering excellent customer service. You’ll never be put through to a call centre—you’ll have a dedicated policy manager to deal with your claim and you can expect friendly, personal and empathetic service every time you need to speak to us.

Notes on our income protection plans

We show the benefits on this webpage in US dollars, but we can also denominate your policy in pounds sterling or Euros. You won’t find complete information for our plans on this webpage, nor the full T&Cs, limitations, and exclusions that would apply if you purchase an income protection insurance policy. You can find complete information in the plan agreement, which we suggest you read together with this webpage. We work hard to ensure the information we provide on this webpage is accurate and up-to-date, but inaccuracies are possible. We rectify errors as soon as we become aware of them. The T&Cs that apply to your policy are those found in your plan agreement.