19 Jan What Are The Differences In Income Protection Policies and How Do They Affect Me?
Like most products that fall under the umbrella of Life Insurance, there are many options when looking at Income Protection Policies. There is also so much terminology that’s used which can be off-putting and confusing. This really is a shame because a solid Income Protection Policy will really look after you when you need it do.
Let’s go over some of the terminology and what it means for you:
Guaranteed Premium: This means the premium price will never change. Ever (unless you have chosen Indexation – this will be defined later in the article). It’s the best way to make sure the policy remains affordable throughout the term. This is normally the best option, but premiums may start off at a higher price. The prices for these policies are generally significantly higher if you work in a manual job.
Reviewable Premium: This means the premium price will go up over the term of the policy. In turn, the premiums start off lower than a Guaranteed Premium Income Protection Policy. When and how it increases will be specified in your terms and conditions. The factors normally taken into account by the insurer is their claims experience and market claims statistics, however, many other factors may (and will) be taken into consideration. This is not the best option for long term Income Protection but may suit someone who is in a trainee position and wants cheaper cover over a short period of time, with a view of replacing the policy going forward.
Age Costed Guaranteed Premium: This is a good option for anyone working in a manual job. Though it means the premium price goes up every year, it only does so in line with your age and not market conditions. As a result, the the policy is priced very competitively.
Age Costed Reviewable Premium: Be careful here. Not only will the price of the policy go up with age, it will take into consideration market statistics so price increases will be more aggressive than any other product on the market.
Indexation: To include an indexation option on the policy means you will have the option to increase the level of cover in line with inflation, which in effect, future-proofs the policy. This is highly advisable in most cases but ask your advisor for more details as the way this works can differ from insurer to insurer.
Own Occupation: Undoubtedly the best definition for an Income Protection Policy on the market. This means the policy must pay out if you’re unable to do your job, i.e. even if you are capable of doing another type of job the policy still has to pay out.
Suited Occupation: The insurer will have the right to withhold payment if your doctor / medical practitioner says you are capable of doing a job that falls within your skillset and/or work experience.
Any Occupation: The doctor will have to have stated that you are incapable of working in any occupation at all.
Activities of Daily Living (ADL): There are six activities of daily living which are: eating, bathing, dressing, toileting, transferring (walking) and continence. In order to make a successful claim, most insurers will require that you are unable to do four out of the six activities.
Long Term Protection: This simply means the policy will pay out the sum assured continuously for the whole term of the policy if you are unable to work for that period of time. Premiums will of course be higher than those of short term policies, but where affordable, this is always the best option.
Short Term Protection: Each claim is capped to a given amount of time. Most companies will have a twelve month or twenty four month option and some even do a five year option. These policies are competitively priced and are aimed to provide an individual with a form of sick pay in the event of being unable to work.
With all Income Protection Policies it’s vital that you speak to your dedicated advisor so the cover can be explained thoroughly and transparently, and also be tailored around your needs. Your advisor will also be able to explain whether there are likely to be any exclusions on the Income Protection Policy based on your medical history, lifestyle and occupation which are major factors to consider when taking out a policy.
If you want Fi Protect to help you, simply complete the contact form or advance quote form and your advisor will contact you on a day and time that’s convenient for you. Alternatively, just give us a call… all our advice is free.