Income Protection - 'The Devil is in the Detail'
Income protection, also known as 'permanent health insurance' (PHI), is a specialist subject. We have great experience and knowledge in this area.
There are crucial differences in the quality of various income protection plans. Even the income products offered by any one company may have substantially different policy features.
There are thus many 'traps and pitfalls' for the unwary and specialist knowledge is vital.
To give just two examples of the information we consider when researching income protection:
Are state benefits deducted?
Some income protection providers reserve the right to deduct state benefits from your income protection benefit in the event of a claim. Others do not. We find out which do and which do not.
Are waived premiums deducted?
Some income protection providers reserve the right to deduct 'waived premiums' from the anticipated benefit in the event of a claim.
If you have 'waiver of premium' benefit on a life insurance or personal pension policy, and are unable to work due to ill-health, then after a deferred period (usually 6 months) the premiums of your life insurance policy or personal pension will be waived (which means you do not have to pay the premiums) for as long as you are off sick, if necessary, until the end of the policy or pension.
This is all well and good, however, if you happen to have an income protection plan with a provider that reserves the right to deduct 'waived premiums' this would reduce the amount of income benefit you would be paid.
EXAMPLE:
Say you had an income protection policy with the 'Prominent Assurance' and the benefit was the maximum they would cover you for, based on your pre-disability income, say £2,000 benefit per month.
Say you had an endowment with 'Competent Friendly' for £100 per month and a personal pension with 'Pensions United' for £200 a month, a total of £300, and both these policies had waiver of premium benefit.
Unfortunately, 'Prominent Assurance' turns out to be one of those income protection providers that deduct the total of the waived premiums from the (EXAMPLE) £2,000 per month amount of benefit.
Therefore, in the event of a claim, 'Prominent Assurance' will NOT pay you the £2,000 a month but will only pay you £1,700 as they have deducted the above £300 a month total of waived premiums.
You would probably not be very happy, as you had been paying the cost of a plan with a benefit of £2,000 per month, but in the event of a claim, you (in the above example) would only be paid £1,700.
In addition, many income protection plan providers will deduct not only waived premiums as described above, but will also deduct the amount of any mortgage-related accident and sickness benefit that you may be paid in the event of a claim, thus further reducing your expected benefit.
