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 / waiting 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 Protection PHI can usually run upto age 65/70 
• 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 annually/5 yearly reviewable
• Budget PHI may run upto age 65/70 but payout for only 12/24/60 months upon any claim
• Cover may be based on maximum of, say 50% to 65% of your gross earnings
• If self employed terms usually based on last 12 months / average 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) so you do not have to pay them in claim

     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.

Government benefits are very similar to unemployment insurance ie; not alot and most people would probably see a very substantial drop in their income if they were out of work, even for more than a few months because of illness or disability. 

FOR PROTECTION PRODUCTS WE USUALLY OFFER FROM A LIMITED PANEL OF PROVIDERS

How does Income Protection Insurance work ?

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 insurance phi, income life insurance, permanent health insurance or phi ) aims to pays out a tax-free income.

"PHI Income Insurance" tries to put you back into the same situation you were in before you were ill. But it does not allow you to be better off sick than well. So the maximum amount of income you can replace is the after-tax earnings you have lost, less an adjustment for any Uk State benefits you can possibly claim. 

If you are employed this means that dependant on the Insurer - 50%/65% of your gross income but then paid out tax free. If self employed then this is usually based on last 12 months annual net profits. Note that the old PHI Insurance rules used to be based on 75% of income but then taxable (so beware of swopping these old plans without advice). Different rules also apply for executive PHI, Keyman PHI or Group PHI.

However, some employers arrange group income insurance protection for their employees as a perk of their job, which can pay out an long term sickpay 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 Brown is married & has 3 children and earns £26,000 a year before tax and other deductions. He works as a bank clerk for a big bank and estimates that, if he was ill for a long time, his budget would be affected as shown in the example 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 this period of incapacity, until proposed retirement, index linked & with premiums waived by the insurer upon claim.

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 confusingly as Income Protection, if doing research online, although it is a different product. ASU cover, also known sometimes as Mortgage Payment Protection Insurance (MPPI) or Redundancy insurance - 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/loan 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. NOTE: Benefits are usually payable for a maximum of 12 or 24 months - unlike Income Insurance PHI 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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