Income Protection FAQ

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What is Income Protection insurance?
Also known as 'Permanent Health Insurance' or PHI, this it provides cover for your income/earnings against prolonged periods of sickness and thus, the inability to work. The term of the plan can vary to individual preference, but usually runs to the insured persons preferred retirement age. You can claim on it more than once, i.e. 10 years apart, providing the premiums are up-to-date.

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What is a 'Deferred Period'?
This is the period before which an insurer will not pay out benefit after you become incapacitated. The standard deferred periods available are 4, 13, 26, or 52-weeks, or can also be noted as 1, 3, 6, or 12-months. So, for example, if you held a 3-month deferred policy, you would not receive benefit payments from the insurer until after 3 months. During this time they will assess the claim. Usual practice is to effect a policy with a deferred period that takes account of how long a person has employer sick-pay for, if any.

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What are the 'Definitions of disability'?
Generally, there are two – Own occupation and Suited occupation. Own occupation is satisfied where you simply cannot undertake your job, Suited occupation being where you cannot undertake your job or a job where you are suited by reason of education, training or experience. Different companies have different variations on this, 'Activities of daily living' being another variant. It is best to check with your Adviser and/or the personalised illustration and policy conditions provided by the Insurer.

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How much income can be replaced?
Most policies allow a benefit level of between 50% and 60% of the insured person's gross income, plus State benefits. Currently, the income benefits are paid tax-free.

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Can I hold a joint Income Protection insurance with someone else?
No. Income Protection insurances are personalised to the individual. The majority of people have different occupations, thus face different likelihoods of becoming sick, have different salaries, different levels of employer sick pay, and are different ages. It would almost be impossible for an insurer to underwrite a joint policy.

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What will Income Protection (PHI) cost me?
It depends on a number of factors, such as wage, Gender, Age, whether or not you smoke, height & weight, occupation, and personal medical history/conditions. With Income Protection insurance, three of the key factors are wage, occupation, and deferred period. As a rule, the premium will be higher the higher your wage (and therefore usually benefit), the riskier your occupation, and the shorter the deferred period. All these examples increase the insurer’s risk of paying a claim.

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Where can I buy Income Protection insurance?
Nowadays, the two seemingly most popular ways are to make contact with an Adviser or embrace the usefulness of the internet to obtain a quote. LSE.co.uk has linked to a Whole-of-market Adviser for the benefit of its members and visitors - click here to get a quote!.