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Income Protection Insurance Information

We are experts when it comes to income protection insurance.

We specialise in helping people who have had an application declined, postponed or refused.

We can also help if you're in perfect health too!!

Income protection insurance is intended to pay you a regular income should you be unable to work due to accident and sickness.

These policies are particularly popular with the self employed who recognise the financial risks they face if they are unable to work.

Many employed people also buy income protection insurance as their employer may only pay them for a few weeks or months if they are off work due to accident and sickness.

Unlike critical illness insurance, the policy will pay out no matter what the medical condition that is preventing you from working. As long as your GP and/ or the insurer's medical expert agree you are unable to work, then you will be entitled to claim.

These policies are fully medically underwritten and the insurer does reserve the right to exclude pre-existing conditions from the policy, or to charge you a higher premium for it. In some extreme cases the insurer may decline or postpone your application for income protection insurance.

A good feature of these policies is the ability to choose a deferment period before the policy pays out. For example if your employer were to pay you for up to six months if you were ill, then you can set the policy up so that it starts paying out after 6 months. This will be cheaper than a policy that is set up to pay out after 1 month.

We are able to help you find income protection cover even if you have suffered from:

Cancer
Heart Attack
Diabetes
Paraplegia
Back Problems
Mental Health Problems
Stress
Depression
Asthma
Epilepsy
Gout
Chron's Disease
Meniere's Disease
High Blood Pressure
High Cholesterol

Income Protection FAQ's

The section below will give you detailed information on the various types of income protection insurance policies, what they are intended to cover, and how they work.

If you feel any information is missing , or if you would like more information on any aspect, please feel free to contact us.

What is Income Protection Insurance ?

Own or Any Occupation ?

How long can the policy term last ?

When will the policy pay out ?

How much will be paid out ?

Are there any events when the policy would not pay out ?

How much will it cost ?

What is Income Protection Insurance ?

These notes are intended as a guide only - they cover generic features offered by income protection policies. You will need to decide whether the policy you are offered is suitable for your needs.

As with all insurance policies, we strongly advise you to read the full policy wording of your income protection insurance policy. The policy wording is the document you will rely upon in the event of a claim.

Income Protection Insurance (Permanent Health Insurance) is a fully underwritten medical policy designed to pay you a regular monthly income if you are unable to work due to illness or injury.

It is not possible to cover unemployment in the form of redundancy on this type of policy.

The benefit will continue to pay out until you either: return to work, recover from the illness but decide not to return to work, reach your selected retirement age, the policy term expires, or you die.

Income Protection has the following benefits :

It will continue to pay out either until you return to work, retire or the policy expires
It will continue to offer cover even after a claim
The benefit can increase in line with inflation
The benefit is paid tax free

As income protection cover is health related, with the potential to pay out for many years, the policy requires medical underwriting. This means that some applications may require a report from your doctor or a medical. As a result the premium cannot be guaranteed until these checks are completed. In some cases the insurer may make an additional charge, or exclude some illnesses from the policy.

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Own or Any Occupation ?

Some income protection policies will only pay out if you are unable to perform any type of employment whatsoever. Others will give you a choice of own or any occupation. An income protection policy that is written with an "own occupation" definition will pay out if you are unable to perform your own job.

The use of the phrases "own" or "any" occupation used in income protection insurance can cause some confusion. In very simple terms, a policy that is written on an "any" occupation basis will only pay out if you are unable to perform any other suitable role. A policy that is written on an "own" occupation basis will pay out if you are unable to perform your own occupation. This obviously means that a policy written on an "own" occupation basis is more likely to pay out in the event of you being off work. While this makes policies that offer cover on an "any" occupation basis slightly cheaper, you may feel that the saving is not worth the risk. Our recommendation is to make sure that your income protection policy is written on an "own" occupation basis.

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How long can the policy term last ?

Most income protection insurance policies have a minimum term of 5 years. Typically they will be set up to run to retirement age (50 - 65). Even if you plan to retire after the age of 60 you may choose to only run your policy to age 60 to benefit from cheaper rates.

It is important to make you aware that you are not obliged to pay the premium for the entirety of your selected term. Obviously if you stop paying the premium you will lose all cover that you had in your policy.

Unlike many other insurance policies it is possible to have more than one claim against the policy. For example you may buy the policy at age 40 with a term until your retirement age of 65. During that period you may suffer illnesses and accidents which mean that you have several claims against the policy. The policy doesn't stop after your first claim.

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When will the policy pay out ?

You are able to claim against your income protection policy from the moment you are unable to work due to an illness or accident that prevents you from working. Your condition will need to be diagnosed by your own doctor or specialist and in some cases the insurer's own medical specialist too. Once this situation has been reached, a claim can be made.

Most income protection insurance policies however have a deferment period built in. A deferment period is a period of time you are willing to wait before you start receiving payment. There are some income protection policies that will allow you to claim from the very first day of illness, but the vast majority have a minimum deferment period of 4 weeks.

Normally there are a range of deferment periods available, normally starting at 4 weeks, and going up to 52 weeks.

The longer the deferment period, the cheaper the policy. It is not possible to claim for any period off work before the deferment period is reached. For example if you are off work for 6 months, with a policy that has a deferment of 3 months, then the policy will start to pay out from month 4. In total 3 months benefit will pay out relating to months 4, 5 and 6.

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How much will be paid out ?

Income protection insurance is not intended to protect all of your income. Any insurer will be concerned about the motivation to return to work if a customer is earning as much (or more) than they were when they were working.

Most policies will therefore allow you to insure a percentage of your income. Depending on the insurer this tends to be between 50% - 65%. While this may give you some concern that you will not be able to pay all your bills in the event of a claim, it is worth pointing out that the majority of personal income protection insurance policies will pay out Tax Free. Therefore the gap in the amount paid out by the policy and the amount paid to you by your employer, after tax and deductions, isn't as big a gap as it may first appear.

It is important to choose a deferment period that is closest to the point when your income will actual stop. All insurers will check any income you receive from their policy, your employer and any other income protection policies. If the sum of this income is greater than the policy maximum (50% - 65% of your gross income) then the insurer will reduce the benefit they pay you, to ensure that the income you receive from your employer and/or all insurance policies is no more than the policy maximum.

As soon as the income from your employer stops and/or you stop receiving benefit from other policies, then the insurer will pay you the full benefit.

To avoid problems of this nature there are two key points to remember.

1. Make sure your selected deferment period is as close as possible to the period your employer will continue to pay you.

2. If you have more than one income protection policy you must make sure that the benefit you receive from all your income protection policies does not exceed the lowest policy maximum.

To explain point 2 above further, imagine you had three income protection policies, one that covered a maximum of 50% of gross earnings, another covering 60% and the third 65%. Then the combined benefit you could receive from all of the income protection policies should not exceed 50% of your gross earnings.

If the benefit does exceed the lowest maximum percentage, then one or more income protection insurer will reduce the amount of benefit they pay you.

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Are there any events when the policy would not pay out ?

Income protection insurance policies are relatively straightforward contracts. Therefore most of the things that could stop the policy paying out are in the hands of the applicant.
The policy would not pay out if:

it was discovered that you were not truthful with all the information you provided either at the time of application or the time of claim

if you stop paying the premiums or your premiums are in arrears

if it was considered you were in any way culpable for bringing on the insurable event

if you recovered from your condition but decided not to return to work

if the medical experts considered you to have recovered, even if you feel you have not

if you did not recover by your reached selected retirement age or the policy term expired.

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How much will it cost ?

Most income protection insurance quotes are given based on standard rates. This means that the premium quoted will be based upon obvious factors such as your sex, age, occupation and whether you smoke or not. Because the quote is not based upon any medical underwriting, it cannot be guaranteed until the insurance company issue you with acceptance terms.

On application, the insurance company will fully assess your application including any medical reports or tests as necessary.

Once the policy has been underwritten, the insurance company will issue formal terms to you, including the monthly premium. Whether the premium remains the same during the term of the policy will depend on whether you have selected a guaranteed or reviewable policy.

A guaranteed premium is exactly what you would expect, namely the premium will be the same throughout the life of the policy.

A reviewable policy will start out with an initial premium (normally cheaper than the guaranteed premium), but after a certain period the insurance company will review the policy. At this point they could adjust the premium you are required to pay.

Some insurers offer age related premiums which increase as you get older. The majority however are fixed price which means that the price will not increase, unless you have chosen a reviewable policy.

An age related income protection policy will normally be cheaper at outset than a fixed price policy. Given that these policies are intended to be held for many years, there will come a point when the premium of the age related policy will become more expensive than the fixed price policy. In our experience fixed price policies are invariably cheaper in the long run.

If you want to protect the policy against the impacts of inflation, or have other reasons to gradually increase the value of the policy, you could choose to “index” the policy. This means that each year the benefit will increase in line with a known index, such as the Retail Price Index (RPI) or an agreed percentage. With an indexed income protection policy, both the benefit and the premium will increase year on year. There will be other charges for administration and running of the policy. These are included in the monthly premium. You will be able to see details of these charges in the illustration we provide to you.

The insurance company will also pay us a commission for introducing the business and providing you with help and information. We are keen to stress that this does not make it more expensive for you to deal with us, in fact as recognised independent financial advisers some insurance providers give us preferential rates.

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	Platinum Financial Consulting, 14 Mildmay House, Foundry Lane, Burnham-on-Crouch, Essex, CM0 8BL Telephone : 08450 55 95 65 Fax : 0871 277 1422 Email : help@platinumifa.co.uk


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