Income Protection
Income protection insurance can pay you a tax-free, index-linked monthly income until your retirement age, if you are unable to work due to accident or ill health.
Why should you have income protection insurance? Because quite simply, your income supports everything else in your life. If your income stopped, for how long would you manage? If you are concerned about how you would manage in the event of ill-health or accident, please contact me for expert income protection advice.
Income protection cover is not all the same!
The quality of your income protection cover, or how likely it is to pay out if you cannot work, is determined by your policy’s definition of disability.
The importance of having the correct definition cannot be stressed too highly. If you have a poor quality disability definition, it could mean that your policy will not pay out, leaving you with no money.
The ‘Own Occupation’ definition is regarded as the ‘Rolls Royce’ of income protection cover and is the very best type of income protection cover available. As an independent adviser, I always strive to ensure that my clients have ‘own occupation’ cover.
The income protection definition that you can have is determined by your occupation and duties. However, different insurance firms treat the various occupations in widely-differing ways, and you should not assume, due to your particular job, that you cannot have the best ‘own occupation’ cover.
The four main disability definitions are:
Own Occupation
As stated above, this is the very best type of income protection cover. It will pay out if you are temporarily unable to do the material and substantial duties of your job.
(Material and substantial duties are those normally done in your occupation and which cannot reasonably be left out or changed by you or your employer.)
Own or Suited Occupation
This definition is not as good as the ‘own occupation’ definition described above; however, it still provides worthwhile cover. It will pay out if you are temporarily unable to do the material and substantial duties your own job or any to which you are reasonably suited by your education, training, knowledge or experience.
Aspects of Daily Work or Aspects of Daily Living
This is a poor quality definition. It typically depends upon an inability to carry out certain specific tasks, such as sitting, walking, lifting, getting up from a chair, bending or kneeling or performing domestic duties. You would usually have to be unable to carry out at least three of the range of such tasks. Each of the tasks would have an exact definition, for example, ‘walking’ might be defined as (the inability to) "walk 200 metres without stopping at a reasonable walking pace and without the use of sticks, crutches or other assistive devices".
Any Work
A policy with this disability definition would not pay out unless your were so ill or so severely disabled that you were incapable of carrying out any work whatsoever. This is an extremely poor definition and the value of a policy with such a definition of disability would be questionable.
State Benefits?
If ill health prevents you from working, you may be entitled to some state benefits. However, if you have a look at the eligibility criteria and potential benefits, you may wish to consider taking out your own private income protection insurance, rather than rely on the state. If you do qualify for state benefits, they will be subject to a benefits cap.
Ill Health Early Retirement?
If you’re in an occupational pension scheme, you may be able to claim ill-health early retirement, but did you know that many schemes (such as the NHS, won’t consider you for ill health early retirement unless your disability is permanent. A ‘temporary’ condition could last several years. What would you do if your condition is not deemed ‘permanent’ in nature by your pension scheme and your application for ill health early retirement is refused?
On the other hand, an income protection plan will pay out even if your inability to work is only temporary, you do not have to be permanently incapable of working. .
Garry’s Story
Garry was a successful Civil Engineer. He enjoyed sports and being physically active. One day, as usual, he went to work, but Garry was not to know that it was not to be a normal day. Something was going to happen that would change his life forever.
Garry explains what happened when, using a Stihl Saw, and carrying-out a task he had done "hundreds of times before", an accident occurred that, in an instant, caused a dreadful injury to his shoulder.
His doctors managed to repair his shoulder and save his arm. Following several subsequent years of physiotherapy, Garry recovered the use of his arm, but it would never return to its full strength. His career as a Civil Engineer was therefore at an end.
Incredibly fortunately, and only a couple of months earlier, Garry had taken out an income protection policy that would pay him a "living wage" to his age of 65, if he was unable to work due to accident or illness.
Once he was back home after the operation, he put in a claim on the policy, which was very quickly processed with the result that "they started paying within three days".
He is so glad that he took out the policy and says that it "has taken such a weight off my shoulders" and still enables him to "contribute to the family" which gives him the self-esteem of not being a financial dependant, as a consequence of his decision to take out the income protection policy.
Use My Expertise
I offer expert, no obligation, independent income protection advice, so whether you are considering taking-out income protection, or would simply like to have a free review of any existing income protection cover that you may already have, please contact me for advice.