What is Income Protection?
Income Protection is the safety net that provides a replacement income should you become unable to work due to an accident or sickness.
We all rely on that all-important income we earn, whether it’s to support our family, pay our bills or just do the things that make us happy.
What we don’t like to consider, is if something were to happen to us, which meant that our income suddenly stopped, how would we deal with such a traumatic impact upon on our lives?
How much Income Protection do I need?
We often hear feedback from our clients that they have previously been advised ‘you should cover for 50% of your monthly income as that’s what the average is’ which frankly is terrible and unfounded advice.
No two people are the same and protection reviews need to be tailored towards the individual asking for advice and not given ‘the industry average’.
If you are considering income protection you need to discuss your financial situation with an adviser and consider your monthly requirements for:
- Living expenditure
- Any other monthly commitments.
If you’re off work due to an accident or sickness, you need to be focusing on your recovery, not worrying about your financial commitments.
When completing a fact find with your broker, have your bank statements to hand so you don’t forget anything.
Nothing is worse than paying monthly for your insurance just to find you have a shortfall when it comes to a claim.
Hooray Health & Protection Top Tip: If you’re currently employed, before deciding how much cover you need, speak with your employer about your remuneration package.
Some companies will provide income protection as part of their employee benefits package. Make sure you don’t have anything in place as you don’t want to be paying unnecessarily for cover you already have.
Same applies when it comes to disclosing existing insurances you have in place, if you have life insurance cover, you may be able to negotiate a discount placing both with the same provider.
How much does Income Protection cost?
Income Protection pricing is calculated via several factors depending on the individual applying for the policy and the options they choose.
Insurers will consider several factors when deciding the premium which includes (but not limited to):
Age: The older you are, the higher the chances you have of catching a serious illness. Insurers will take this into account, and you will find premiums more expensive the older you are.
Medical history: Any pre-existing medical conditions and family medical history can have a significant impact, as medical based loading’s can be quite high for certain conditions.
Occupation: What you do for work will have one of the biggest impacts on your premium. If you are in a high-risk role (steel workers, roofers etc.) there is a higher chance of you having a serious accident and needing to claim than if you were in a low-risk role (office worker, retail etc.).
Policy set up: When arranging the insurance, you have the option to choose how long until the policy starts paying, how much of your income you want to cover and for how long. The more benefit you and the longer the policy pays for will increase the costs you pay.
These are just some of the things you need to consider when arranging a policy as additional factors and upcoming lifestyle changes will impact you premium.
If you are looking to get the best price possible, it is always best to discuss your options with a specialist broker as they wont charge you a fee due to receiving commission directly from the insurer.
Having access to the whole of the market market when reviewing a sick pay insurance policy instead of just one provider is also a huge benefit to clients.
Will insurers pay my claim?
Insurance in general has gained a bad reputation over the years due to payment protection scandals and historic mis-selling by old school insurers.
Fortunately, times have changed and firms that sell insurance are heavily regulated to prevent any mis-selling and ensure customers are correctly advised.
Insurers have also ensured they are doing what’s right by their clients with 88.1% of all claims submitted being paid with the average value of claim being £22,058.
If we review by individual insurer, as any good broker should do, the top insurers are paying 96% of all claims submitted whereas the insurers at the bottom of the table are paying 88%, which is unfortunately lower than the average for the industry.
At Hooray Health & Protection, we consider an insurer’s claims approval rate as this is obviously the most important part of the insurance.
Which terms and conditions should I look out for?
Unless one of our clients has a hazardous occupation and we are struggling with cover, we would never recommend any incapacity definition other than ‘own occupation’.
If we stop with the insurance jargon and break down the definitions for what they mean to our clients, they are as follows:
Own Occupation: If you need to claim, the plan would pay out if you are unable to continue working in your current job capacity i.e. your ‘own occupation’.
Suited Occupation: If you need to claim, the insurer would undertake an assessment where they review your work experience, skills and any education. Once completed, the insurer may state you are able to return to work in a different role for which ‘you are suited’.
Activities of daily living: An historic definition and not a good one in our books. An insurer would assess the claimant’s ability to undertake tasks such as showering, getting changed, using the toilet, walking etc. and if one couldn’t do a set number of these it could pay out, but if you could do some it would be declined. Insurers could use this to argue you are fit for certain jobs, even after suffering a serious accident or sickness.
Why use Hooray Health and Protection for Income Protection Insurance?
Income Protection is a complex product with a few different factors that need to be considered by a protection expert before you take out your policy.
If you are, or previously were a smoker, this is going to impact your premiums and certain insurers will price more favourably then others, which needs to be considered.
The same applies for pre-existing medical conditions or one’s medical history, as different insurers will take a different view on conditions than others.
Going direct to an insurer or via a broker who doesn’t know what they are doing could end up costing you more in the long run.
At Hooray Health and Protection, we understand the industry and everything that comes with the intricacies it presents. We won’t charge you anything for a review as we are paid by the insurers.