Income Protection
Income Protection Insurance, also known as Permanent Health Insurance, is designed to provide you with a tax free income if you are unable to work due to an accident or illness. This insurance allows you to concentrate on getting better rather than worrying about how you are going to pay your bills.
You can generally cover up to 60% of your current income, although this does vary between insurers. Some insurers also link their payments to the Retail Prices Index, keeping pace with the true cost of living.
You can also insure full time stay at home parents. A policy will pay out an income to cover any costs incurred employing someone else to carry out important household duties, such as the school run, cleaning and cooking, should the career fall ill. As you’ll see coverage can be wide ranging.
Premiums for income protection depend on your current state of health, medical history, age, sex occupation, level of incapacity you choose and your chosen (link - jargon)deferred period(/link). An income protection policy will start to pay out after this agreed deffered period, with the payments only stopping when:
- You are well enough to return to work
- You reach the end of the policy term
- You reach retirement
- You die
There are usually no limits on the number of claims you can make during the term of the policy. However, if you start a new job, make sure you or your financial adviser inform the insurance company as failure to do so can invalidate future claims.
What's covered?
When taking out a policy you can usually choose which of the following definitions will be used to asses a claim if you become ill:
- Own occupation: this will pay out of you can no longer do your own job
- Any suited occupation: in order to receive benefits you would need to be unable to follow either your own occupation or another occupation suited by training or experience.
- Any occupation: this would pay out if you were unable to perform any job.
- Work tasks: you will be able to claim if you cannot perform a number of everyday work tasks, such as walking, lifting, reading and hearing.
- Activities of daily living: you can claim if you cannot perform a number of everyday living tasks unaided, such as dressing, washing or using the toilet.
Other benefits
In addition to the main benefit some policies will also include provision for proportionate and rehabilitation benefits.
Proportionate benefit, where offered, means that if the nature of your incapacity allows you to take up an alternative occupation, but you cannot earn the same level of income, the policy will pay out a reduced amount on top of your new salary.
Rehabilitation benefit is an income payment that helps you if you do return to your main occupation, but earn less as a result of your incapacity. This is generally restricted to a short term, such as 24 months, after which payment will stop.
The terms of both of these benefits, if they are offered at all will vary between policies and insurers.
If you need more help deciphering the complex exclusions and differences in cover, seek some advice and contact us today.We usually offer protection products from a selected panel of providers.