Income Protection
What is it?
A policy that provides a regular income if you are unable to
work because of sickness or disability.
Why do you need it?
Many people make the mistake of thinking that should they fall
ill, have an accident or lose the ability to work, the State will
step in. Wrong - the rules governing sickness benefit claims have
changed dramatically.
Income Protection should be considered if you would not be able
to maintain your standard of living on State Benefits alone.
If your regular outgoings are normally met from income, then
taking away that income can have drastic and wide ranging
implications including inability to meet mortgage and loan
payments, as well as basic household bills and living costs.
Plans are available for employees, self-employed people and even
those who do not work but are responsible for managing a home.
Things to bear in mind
When taking a policy out you can normally set it up in a variety
of ways - each will pay out in a different way and therefore has an
effect on the monthly premium. The different criteria include:
- Occupation definition
- Deferred period
- Guaranteed or Reviewable premiums
- Increasing or level benefits
It is important to ensure you take out the policy that best
suits your circumstances, not necessarily the one that provides the
cheapest premium.
Accident, Sickness & Unemployment Cover (ASU)
What is it?
policy that provides a tax-free monthly income if you are
unable to work as a result of medium term sickness, incapacity or
unemployment (normally 30 days or more).
Why do you need it?
Many people make the mistake of thinking that should they fall
ill, have an accident or lose the ability to work, the State will
step in and sort it all out. Wrong - the rules governing sickness
benefit claims have changed dramatically.
Before April 1995, you could qualify for long-term sickness
benefit if you were rendered incapable by illness or disability, of
doing your own job of work. Now the rules state that you will only
qualify for long-term sickness benefit if you cannot do any job of
work. In other words, only if you are completely incapacitated will
the State pay you any benefits. This means that, to all intents and
purposes, there are currently no long-term sickness benefits in the
UK.
Even if you do qualify for getting long-term sickness benefit
from the State - and it's currently around only £66 a week - that
benefit is now taxed.
Things to bear in mind
This policy is similar to Permanent Health Insurance (PHI) with
two main exceptions:
- Unemployment cover can be included
- The policy normally only pays out for a specific period (e.g. 1
or 2 years)