Income Insurance Protection [PHI] Compare Broker Only                            ~ Income Insurance Cover Rates in >15 secs

Income Insurance (PHI) ~ What is it all about ?

                                                

Income Protection Insurance ~ Key Features 

• Designed to pay out an Income not lump sum on accident or sickness
• Usually has a waiting or deferred period from 4/8/13/26/52 weeks 
• PHI Benefits are currently paid out tax free on claim until you return to work or plan end date
• Income Insurance Benefits may be level or inflation linked 
• Medical evidence may be required and a medical examination for those with health issues
• Premiums may be guaranteed or reviewable
• Cover may be based on maximum of, say 50% to 65% of your before-tax earnings
• If self employed terms usually based on annual net profits
• Waiver of Premium (where the Insurer waives/protects & covers your premiums after a deferred period of 4/8/13/26 weeks due to sickness or accident)

     If you are an employee and you fall ill, your employer might pay you your full pay for a few weeks or months. By law, an employer currently must pay most employees statutory sick pay for up to 28 weeks, though this will probably be a lot less than your full earnings. After that, you would probably have to rely on state benefits. If you are self-employed, you won't have this option.

State benefits are not generous. You would probably see a substantial drop in your income if you were out of work for more than a few months because of illness or disability. So what can you do to insure your income ?

How does Income Protection Insurance work ?

"Income Insurance" aims to put you back to the position you were in before you suffered a loss. But it does not allow you to make a profit out of your misfortune. So the maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost less an adjustment for Uk State benefits you can possibly claim. This usually translates into a maximum of, say 50% to 65% of your before-tax earnings.

If you can't work because of illness or disability, an income protection plan (also called income protection insurance,  income protection cover, income protection life insurance, salary insurance, salaries insurance, wage insurance, wages insurance, earnings insurance, sick insurance, sickness insurance, income life insurance, permanent health insurance or phi ) pays out a tax-free income.

However, some employers arrange group income insurance protection for their employees as a perk of their job, which can pay out an income after the statutory sick period. So check what you are entitled to.

Example of working out how much Income Protection Policy cover you may need :

Gordon is married & has 3 children and earns £26,000 a year before tax and other deductions. He works as a bank clerk for a bank and estimates that, if he was ill for a long time, his budget would be affected as shown in the table below.

Gordon budget calculations in the event that he couldn't work 

# Estimates of Income he would lose
# Take-home pay £18,000
# Deduct income he would gain
# Approximate long term incapacity benefit £4,000
# Deduct expenses he would save
# Work related costs, mortgage interest payments if covered by mortgage payment protection insurance £3,000
# Add extra expenses he would pay
# Allowance for, say, cost of special equipment or treatment, cost of heating your home for more time £2,000

EXTRA INCOME NEEDED £13,000

So Gordon reckons he would need an income protection plan for around £13,000 a year to maintain his lifestyle. This is 50% of his before tax pay of £26,000.

Gordon also works out that as a perk of his job, his employer will pay him 50% of salary for 52 weeks after the statutory sick pay period of 28 weeks. Gordon therefore arranges for his income protection policy to pay out after 80 weeks of incapacity (see waiting period below).

So tell me more about Permanent Health Insurance (PHI)

Underwriting & Health Issues 

You pay a monthly premium throughout the term of the "Income Insurance" policy. Cost depends mainly on:

# Your age - at the time you start the policy. Older people are more likely to suffer an illness, so pay more.
# Your sex - gender can have an affect on the premium you pay.
# Your health - at the time you start the policy. If you have existing health problems you might be refused cover or have to pay more.
# Smoker Status - for example, smoking makes you more likely to make a claim, so you'll pay more than anone smoker.
# Your Occupation - some jobs are more likely than others to contribute towards illness. For example, Gordon is a bank clerk so is deemed to have a very safe job but a deep sea diver runs high risks and so would have to pay more.
# Hobbies and lifestyle - for example, rock climbing is high risk, so you'll pay more.
# Waiting period - once you claim, there is a delay before payments start. You can choose how long this is - for example, from 4 weeks up to 104 weeks usually dependant upon occupation. The longer the waiting period, the less you pay. 

If your health is poor or your lifestyle is considered risky, you may be refused cover or have to pay more than normal.

Where are you now & What do you need ?

Check whether you already have protection in place in case you get incapacitated, and for how long that protection would last. For example your employer may have an Income Insurance scheme in place you can benefit from, or you may have a payment protection insurance that covers your mortgage.

Check whether the policy reduces what it pays out if you receive state benefits or claims monies under any other insurance policy
Some income protection policies only pay out if you can't do any work, but you would have to be seriously incapacitated for you not to be able to work at all. Others cover being unable to do any work for which you are suited. The best pay out simply if you can't do your normal job, but premiums tend to be more expensive.

Most PHI policies would pay out until your reach age 65 or when you have chosen the cover to end.
Check how different occupations are treated. Different Uk Income Protection Providers put the same job in different risk categories.
Does the cover increase in line with inflation?

Why not just take out Critical Illness Cover instead ?

Critical illness cover (CIC) - pays out a tax-free lump sum if you are diagnosed with a life-threatening condition for example cancer, heart attack, stroke, diabetes etc; listed in the policy - is a possible cheaper and simpler alternative to Income Insurance. But there are lots of common situations when CIC would not pay out - for example, if you had back problems or a stress-related illness. Additionally, not all occurrences of the critical illnesses listed are covered, for example some early stages of cancer are not covered. Ideally you should have both plans if your budget allows this. For more information on this & costs get Critical illness cover quote or talk to a professional broker.

Is Income Insurance not the same as [ASU] Accident Sickness Cover or Mortgage Payment Cover ?

Accident, Sickness & Unemployment insurance (ASU), can also be referred to as mortgage payment protection or redundancy insurance and will provide you with an income to meet your outgoings if you are off work sick, have an accident or are made redundant. It pays out a monthly benefit to cover your mortgage and other related costs but for a limited period.

You may choose the amount of benefit you would like to receive - although there are some limits on the maximum amount. The premium will be a percentage of the amount of monthly benefit you would like to receive. Benefits are usually payable for a maximum of 12 or 24 months unlike Income Insurance which may pay up to when you retire usually age 65.

Some policies will also allow you to choose whether you want to receive benefits for accident and sickness only, unemployment only or all three. Most policies will also have a 'deferment period' usually 30 days. This is the period of time you will have to wait after losing your source of income until you may claim the policy benefit.

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