Income Protection
“My family could not support me if I was ill or injured and could not work”
If you lose your income it can have major financial implications, not just in terms of paying the bills, but also simply the cost of living. Our Income Protection programme can take this worry away.
If you become too ill to work then your employer is obliged to carry on paying your salary - for a while. Many employers are generous, and keep you on full salary for longer than they are legally required to, but this will not last forever, and eventually you will be left with only statutory state benefits to support you. The position for the self-employed is clearly worse since they have no employer.
Insurance companies have devised two ways of dealing with this. The first is a feature called waiver of premium which is available on many sorts of financial product including life insurance. It is also sometimes called "payment protection" - it simply means that the premiums on the policy continue to be paid for you if you are unable to work due to illness. However, you can't arrange premium waiver with Sainsbury’s to cover the cost of your groceries if you are too ill to work.
Therefore, the insurance industry's second answer is Permanent Health Insurance (PHI). In short, this provides you with a proper income if you are unable to work due to illness.
You will be eligible for some State Benefits in the event of illness, and PHI is therefore only available to top up the difference between this and your normal income. Insurers will not give you more cover than this since it would provide you with an incentive not to work. There are also other considerations such as the following:
In addition to the usual higher rates for smokers etc., the cost of PHI depends on your occupation. Cover is cheapest for administrative workers, highest for occupations such as electricians and tree surgeons, and bomb disposal experts are uninsurable.
Like waiver of premium, the cost of PHI depends on whether you want cover if you are too ill to do your current job ("own occupation"), or any sort of work at all ("any occupation"). The former is more expensive than the latter.
PHI policies have a "deferred" period - the amount of time between you falling ill and being able to make a claim on the policy. The longer the deferred period you ask for (which can be anything from immediate to 2 years), the lower your premiums will be.
PHI is not particularly cheap, for the simple reason that you are much more likely to make a claim on it than you probably think. An astonishing percentage of people have at least one protracted period of absence due to illness during their working life. To help make this cost more palatable, insurers offer not only "plain" PHI, but also a version with an investment element. In other words, there are some plans on the market which will have cash-in value rather than simply providing you with insurance.
It is important to note that PHI does not pay for redundancy - it's purely a health policy.
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