Illness can strike anyone, so it helps to be prepared for it

March 29, 2019
Taryn Lee-Johnston

Illness can strike anyone at any time and, depending on how you earn your living and what kind of lifestyle you lead, it doesn’t even have to be particularly serious to be a drag on your finances.  As always, being prepared can help to cushion the impact.

Short illnesses (e.g. colds)

Colds and mild bugs are a fact of life, as are seasonal ailments like some allergies (e.g. hayfever).  If you’re self employed being laid low for even a day or two can be a problem, (especially if it occurs at a time when you’re chasing a deadline).  For those in paid employment, loss of income may be less of a concern (although there are exceptions such as employees who derive significant income from commission or who may miss out on the chance of overtime), but it may still impact you in other ways.  For example, if you have essential tasks to do, which cannot wait (e.g. taking children to and from school) and you cannot do them yourself, then you will have to arrange for someone else to do them and this may involve payment.  Because of this, regardless of whether you are self-employed or employed, it can be very beneficial to have an emergency fund you can reach into when the unexpected happens.

More serious illnesses

Similar comments apply to more serious illness although, of course, to a greater degree given that a more serious illness will, presumably, have a more significant impact on a person’s ability to work.  While those in employment may have access to in-work benefits as well as state benefits, it is highly recommended to check what this would actually mean in practice and how well the income you could expect to receive in certain situations would stack up against your expectations of what you would need to maintain your current lifestyle and to factor in the possibility that being struck by a serious illness could actually increase your expenses, for example, through the need to pay for transport to get to and from hospital.

The self-employed, by definition, will not be eligible for in-work benefits and therefore will need to make their own provisions.  There are various forms of insurance cover which might apply to those looking to protect themselves against the possibility of being forced to deal with a serious illness of which the two which stand out are income protection insurance and critical illness insurance.  You might also want to consider pet insurance, to avoid having to make difficult and painful decisions when both your health and your finances are suffering.  Last but by no means least, in a worst-case scenario, having appropriate life insurance in place can make life easier for anyone you leave behind.

The economically inactive

So far, this article has focused on income-earners, be the employed or self-employed, however even those who are classed as “economically inactive”, such as home-makers can play an important role in ensuring the health of the family finances.  For example, in a family with children, the presence of a healthy home maker can remove (or at least reduce) the need to pay for child care.  Because of this, it can make sense to arrange relevant insurance cover for non-income earners, such as critical illness insurance and life insurance.  It may even be worth extending critical illness cover to children since it could provide you with extra money to help with any expenses caused by the child’s illness, for example adapting a home to their needs as they convalesce, or paying for other people to look after siblings while the home maker nurses the sick child (or vice versa).