What is Income Protection?
An income protection plan is designed to pay a monthly income to you if you are off work with an illness or injury. Over 670,000 men aged between 40 and 64 are off of work for more than six months due to an illness or injury.
What type of Income Protection Plans are there?
There are two main types of income protection plans. There are long term income protection plans such as permanent health insurance and there are short term plans such as ASU, (Accident, Sickness and Unemployment) and PPI (Payment Protection Insurance) and MPPI (Mortgage Payment Protection).
The short term insurance plans are normally taken out to cover a debt or mortgage and there are usually no medical questions required to be asked. The short term plan is open to almost anyone in employment and as there are usually no medical questions, the plans often just have full blanket exclusion on all pre-existing medical conditions no matter how long ago they were. The insurance plans normally have a restricted pay-out period of one or two years and have to be reviewed every year due to the fact the plan is a general insurance plan the terms and conditions are subject to change. If you are to claim on your plan in year one and have a two year policy, the insurance company may decide to exclude the condition you have suffered, going forward.
One of the key issues with the payment protection insurance scandal in recent years is that these plans were sold to everyone, irrespective of whether they required it or not. The plan has the same terms and conditions for everyone, however as everyone’s circumstances are different, the policies could not be right for everyone. This resulted in many claims that were put forward being turned down. We are proud to say at Proadvice we have never had a policy turned down for any income protection product or a complaint on the product being mis-sold. This is because we at Proadvice will take every care to ensure we only recommend a product that is completely suited to you.
The long term income protection plans are linked to your income. There is no need for a loan or mortgage (so an additional debt) to set the plan up unlike with the short term plans. The plans pay a percentage of your salary during a period of sickness and the plans normally run until you can go back to work or reach retirement.
Long term income protection plans are required to be medically and financially underwritten and are personal to the applicant. The plans are built around your job and medical history; it is not a one size fits all. If you have suffered from a bad back or stress in the past then you may find the insurance company choose to exclude the pre-existing condition from your plan. As the plan is designed to run to your retirement there is no need to review the plan yearly, however it is advised that you keep in contact with your Proadvice financial adviser and update them if there is a change in your job, salary or sick-pay as a change in circumstances could reduce your premium cost.
What Type of Income Protection do I Need?
Income protection cover is usually for 50% of your annual salary. You are not able to request from your insurance company for more income than you are entitled to and at the point of any claim if you cannot prove your income then the insurance company will only pay what they believe you are entitled to.
In addition to this, you will also need to be cautious that you do not under insure yourself. If you are off of work on long term sick then you will surprised how much you need to get by, even if you cut down on all luxuries so you will need to ensure your costs can be covered.
Normally the most common things that need to be covered are mortgage or rent payment. If you are ill you will still be required to keep up your repayments to keep a roof over your head. The bill payments will also need to be maintained, the last thing you will need is to be sitting in the dark or cold when you are attempting to recover from an illness. Food is also vital; many people forget to take this cost into consideration. To assist in your recovery, a healthy diet and having all the essentials would be a great start.