Being forced out of her job as a social services worker was a nightmare for Bronwen Jenkins. She was left suffering from depression and post-traumatic stress disorder and faced having her home repossessed and being made bankrupt.
But an almost-forgotten income protection policy taken out more than a decade earlier kicked in, meaning that she saved her home and improved her health. Even though Ms Jenkins subsequently returned to part-time work, she has had payouts from the policy for more than 13 years – and they will continue until she reaches retirement age in June.
"I didn't think my income protection policy would pay for a psychiatric condition; I thought you'd need to have something major like cancer," says Ms Jenkins, 59. "So when I rang AXA to see if I could claim, I expected the answer to be no. But I was told that psychiatric conditions were covered, and I started to receive monthly payments from my policy."
Even when she set up a small sales business a couple of years after starting to claim on her policy, the payouts continued, making up the difference between her old and new levels of earnings. "Unfortunately, my asthma worsened over the years and developed into emphysema, which meant that I was unable to work at all, so now I receive the full payments from my insurance policy again," says Ms Jenkins.
Income protection policies are not terribly popular. While a lot of people have some sort of cover through their work, about half of the adult population has none, according to research by Friends Provident. This would leave them struggling to get by if a long-term illness meant they were unable to work. Experts argue that income protection is more important than life insurance because you are far more likely to be unable to work for a long period than you are to die prematurely.
"People might worry when they are 30 about their pension, from which they cannot benefit for 35 years, but they need to think about protecting their income, from which they might benefit next week," says David McCormack, of AXA Protection.
Part of the problem is confusion with the payment protection insurance (PPI) policies that were pumped out by lenders in the past decade to boost their profits. But PPI is expensive, has low payouts and many exclusions, while income protection insurance is flexible and affordable, says Kevin Carr, a consultant with Protection Review. "An average person could get cover for about £25 a month and that would pay out on most illnesses," he says.
"People don't like to think about being ill and off work but one in five of us will have a serious illness before we are 65," adds Ed Stuart-Brown, of Friends Provident. "People simply presume the state will look after them or family and friends will step in, but that only happens in the short-term. For long-term support they need to make their own arrangements." Finding cover is relatively easy because most of the major insurers offer policies, but they are too complicated for online price comparison sites to compare, according to Carr.
"Because income protection is worked out individually, with factors such as age and health making a difference, I would recommend visiting an independent financial adviser to ensure you get the right cover at a fair price," he adds.
Insurance by numbers
People currently living on state benefits because they are unable to work, according to the DWP
The drop in income that AXA says an average person would face if they had to live off benefits. Average net earnings are £19,468.97 but a single person's Employment and Support Allowance is only £4,947.80 per year
Percentage of people likely to be off work for longer than six months before they are 65
The number of people without income protection insurance, according to Friends Provident
The length of time most people could support themselves if they could not earn a wage
Of people think they could live on less than 35 per cent of their current take-home pay
The average amount such people would be underinsured by, says Friends Provident