Don’t yawn and before you think, ‘I’m sorted, I don’t need to read on I have income protection cover’, ask yourself the four crucial questions below as your circumstances could have changed! But first…
What is income protection cover?
Here’s a quick reminder. Income protection cover aims to provide you with an income if you’re unable to work through any sickness or accident.
In simple terms, if you’re off work sick it’s designed to dovetail with your contractual sick pay and replace a significant portion of your income.
NOT to be confused with Critical Illness Cover
Critical illness cover, on the other hand, pays a lump sum if you’re diagnosed with one of a range of specific potentially fatal illnesses. Critical illness is rather like life insurance paid in advance – useful for repaying mortgages.
Income Protection ensures your long term financial security by providing you with an income if you’re unable to work.
The two biggest sources of claims on income protection plans relate to time off work with mental health issues, and claims arising from chronic musculoskeletal matters – neither of which would automatically be covered under a Critical Illness plan.
Most of us need our income in order to live, as do those who are financially dependent on us. Of all the things to insure, this basic requirement in life is arguably the most important!
Question 1: Has your income changed since you took income protection out?
Your income protection contract should be index-linked. But it is highly likely that either the benefits under the contract or your income have risen since you originally arranged your cover, meaning the two are out of kilter.
This could lead to you being under or over-insured. It’s worth checking…otherwise what you actually get when you desperately need the income could well be quite different from what you were expecting.
Question 2: Will you need to work past age 60?
The NHS has changed the point at which you can start to draw your NHS Pension. We come across many old income protection contracts that were written to age 60, to match the old pre-2015 normal retirement age (NRA) for the NHS pension scheme. But since 2015 the NRA for the NHS pension scheme now matches the state retirement age which is 67, or for many 68.
If your financial commitments (possibly helping children with university costs) mean you need to work past 60, you should review your income protection cover now.
Question 3: Has your home life changed?
If you’ve increased your mortgage, had a child – or perhaps seen a significant change in your personal relationships, your financial circumstances have almost certainly altered.
Your need for income if you are ill will almost certainly have changed too – so make sure you don’t neglect to review the cover you hold.
Question 4: Is there a new product with even better cover more suitable for you?
In recent years there have been improvements to income protection contracts. For example, better support to help get you back to work after illness, tighter definitions of your ‘own occupation’, and great inexpensive additional benefits you can add to your policy.
These include:
- Fracture cover (smaller partial payments for fractures and broken bones – useful for the more active amongst you), and
- Global cover that will track down and fund your treatment by the best specialist for your illness globally.
For some of our clients, it’s been worth them reapplying for the same cover in order to benefit from the enhanced contract.
The last word
We’re nearly at the end so clearly, income protection isn’t so boring after all! Maybe a review of your existing income protection policy is required?
Shockingly, there may even be some of you who haven’t yet added income protection to your financial plan. Hard to comprehend I know…
Legal & Medical strongly believe that adequate income protection is the cornerstone on which you build your financial plans. Without it, all your hard work could result in a future constructed on very unstable foundations.
Is income protection something you have overlooked within your financial plan? Let us know by adding a comment below.
Hi
I’m Dr Naresh Thirumalai, consultant EM in South Wales .I’m 46 with Mild Hypertension on medication .Will I be eligible for income protection?.
Hi there,
Yes, you will be eligible for income protection. However, the income protection provider may put an “exclusion” on the policy which will mean that they may put a caveat on the policy and say, for instance, “no claim will be payable in the event of incapacity arising from hypertension or complications”.
Alternatively, they may accept the application and insure you, but they may “load” the premium to reflect the increase in risk, of a future claim. My advice would be to contact one of the Legal and Medical advisers and go through an application process.
Best wishes, Owen