Income Protection

Long term ill-health, either as a result of an accident or serious illness, can have a financially devastating effect on you and your family. How would you pay the mortgage or general household bills? 

Most of us believe we will be fit and healthy for the rest of our lives, will never have an accident and even if we did, the government would take care of us.

Although it's nice to live in that kind of dream world, the reality is all around us. We all know people who can never work again, often following what may have seemed like a relatively minor illness or injury at the time.

Some scary statistics:

Over 2 million people are sick and disabled and unable to work for more than year. 60% have been claiming for five years or more according to the Department of Work and Pensions.

Almost 3,000 people begin claiming sickness benefits every day

UK workers typically have a 1 in 7 chance of being unable to work for than 6 months during their life time due to illness or injury

In recent times, the government has shifted the onus of providing an income during incapacity onto the individual. Don't presume therefore you will get anything other than  'bread and water' type help. If you are self employed, it's all down to you!

So what can you do about it?

There are a number of solutions and which is best for you depends on your circumstances. Permanent health insurance (PHI) typically provides a monthly income during periods of long-term illness or disability. It is also commonly referred to as ' income protection cover' 'disability insurance' and 'income replacement cover'.

PHI can be taken out up to the age of 65, or whenever you retire. Although aimed mainly at income-earners, plans are also available for people who have non paying jobs such as housewives, although these only provide limited cover.

Premiums depend on the period of deferment before you start claiming, how much income you wish to insure for, the type of job you do and your current state of health. If you are employed you may be able to defer claiming for (say) 26 weeks to coincide with the time employers' benefits stop. On the other hand a self employed person may wish to start receiving benefits immediately after becoming too ill to work and would therefore opt for a small or nil deferment period.

Premiums also differ depending on the type of plan, any options the plan may have, and the Company that issues it. Some plans, normally issued by non profit making friendly societies, allow you to build up a lump sum which you get back when you no longer need the policy, typically at retirement. It is possible to protect against inflation in a Policy by taking out an option for a slightly higher premium, that automatically increases the sum assured on a regular basis. Some Insurance Companies also offer the ability to insure against unemployment as an additional option on the Policy.

PHI income is usually limited to between 50% and 60% of your average pre-tax earnings, less other benefits you may be receiving. Income is paid out for as long as you are unable to work, usually stopping at what would have been your retirement age.

When you do return to work after a serious illness, it may well be to a less demanding, lower paid job. Therefore many PHI plans include 'proportionate benefits' - they pay out an amount to ease your fall in income.

There are also policies which pay out a lump sum, known as critical illness policies. You might also like the idea of bypassing the NHS waiting list with a private medical insurance policy.

If a claim becomes payable, the policy holder will receive payment free of tax during the year the disability occurs. This also applies for the subsequent fiscal year (6th April to 5th April)

For a personal quotation or discussion please complete the enquiries form.