Insights

As a financial planner, I spend a great deal of time helping clients build wealth, reduce tax, grow their pensions and plan for retirement.

But before any of that, there is one question I often ask:

What is your most valuable asset?

Many people immediately think of their home, investment portfolio or business.

In reality, for most business owners, their greatest asset is their ability to generate an income.

Without that income, the mortgage still needs paying. School fees still need funding. Household bills continue to arrive. Investments may need to be sold. Retirement plans can quickly be pushed further into the future.

Yet despite this, income protection is often one of the most overlooked areas of financial planning.

A Conversation I Have Regularly

Recently, I sat down with a successful business owner who had spent years building a thriving company.

They had a healthy bank balance, investments, a pension and life insurance.

On paper, everything looked well organised.

During our discussion, I asked a simple question:

"If you were unable to work due to illness or injury for the next two years, where would your income come from?"

There was a pause.

Like many business owners, they had never really considered the possibility.

The assumption was that savings would cover the gap.

When we calculated how long those savings would actually last once household expenses, mortgage payments and lifestyle costs were taken into account, the answer was far shorter than expected.

This is not unusual.

Most people insure their homes, their cars and even their mobile phones.

Yet many leave their income completely exposed.

What Is Income Protection?

Income protection is designed to provide a regular monthly income if you are unable to work due to illness or injury.

Rather than paying a one-off lump sum, it typically provides a monthly benefit until you return to work, reach retirement age or the policy term ends.

The purpose is simple:

To help maintain your lifestyle and financial commitments when your earnings stop.

For business owners, this can be particularly important because there is often no employer sick pay scheme to fall back on.

Why Business Owners Face Greater Risk

Employees may receive sick pay from their employer for a period of time.

Business owners are often in a very different position.

If you are the driving force behind your business, your income may stop almost immediately if you are unable to work.

In many cases:

• The business relies heavily on your involvement
• Clients expect direct access to you
• Revenue may reduce if you are absent
• Fixed costs continue regardless
• Personal expenses remain unchanged

The financial impact can be significant.

The Statistics May Surprise You

When most people think about protection planning, they focus on death.

While life insurance is important, the likelihood of suffering an illness or injury during your working life is often much higher.

Many of the claims paid by insurers relate to conditions such as:

• Cancer
• Musculoskeletal problems
• Mental health conditions
• Heart-related illnesses
• Accidents and injuries

These are not rare events affecting only a small number of people.

They are situations that can impact individuals and families every day.

How Much Income Can Be Protected?

Most insurers allow you to insure a percentage of your earnings, typically between 50% and 70%, depending on your circumstances.

The benefit is usually paid tax free because the premiums are paid from taxed income.

The goal is not to make you financially better off while unable to work.

The goal is to ensure that essential financial commitments can continue to be met.

Common Objections I Hear

"I Have Savings"

Savings are important.

However, using savings to replace lost income can quickly erode funds that may have taken years to build.

Those savings were likely intended for opportunities, retirement, school fees or financial security.

Using them to cover day-to-day living expenses may not be the best outcome.

"It Won't Happen To Me"

Most people who claim on income protection never expected to need it.

Illness and injury rarely arrive with advance warning.

"I Have Critical Illness Cover"

Critical illness cover and income protection serve different purposes.

Critical illness cover pays a lump sum if you are diagnosed with a specified condition covered by the policy.

Income protection provides an ongoing monthly income if you are unable to work due to illness or injury.

Many comprehensive financial plans include both.

Building Financial Foundations First

One of the principles I believe strongly in is that protection forms the foundation of a financial plan.

Before focusing on investment returns, tax efficiency or retirement projections, it is important to ensure the foundations are secure.

A financial plan is much easier to achieve when unexpected events do not force you to start again.

Final Thoughts

As business owners, we spend years building businesses, accumulating wealth and creating opportunities for our families.

We insure our offices, our equipment, our homes and our vehicles.

Yet the asset that makes all of those things possible is often left unprotected.

Income protection may not be the most exciting area of financial planning, but it can be one of the most valuable.

If your income stopped tomorrow, how long could your current financial plan continue without it?

It is a question every business owner should ask themselves.

About the Author

Steven Petts is the Founder of Livian Wealth, an independent financial planning firm serving clients across Essex, London and the wider UK.

With over a decade of experience advising individuals, families and business owners, Steven helps clients build, grow, preserve and pass on their wealth through comprehensive financial planning.

His advice spans pensions, investments, tax planning, retirement planning, protection and estate planning, with a focus on creating practical strategies that help clients achieve their long term goals and gain confidence in their financial future.

Steven believes that effective financial planning starts with strong foundations, which is why ensuring clients and their families are financially protected remains a key part of every financial plan.

Ready to Review Your Financial Foundations?

If you are a business owner and haven't reviewed your protection arrangements recently, it may be worth asking a simple question:

If your income stopped tomorrow, how long could your financial plan continue without it?

A protection review can help identify whether you, your family and your business are adequately protected against the unexpected.

If you would like an independent review of your existing arrangements or simply want to understand your options, feel free to get in touch for a complimentary initial conversation.

Get in touch