Income Protection / Permanent Health Insurance

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?

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. Even if you do qualify for one of the various benefits which you may or may not be entitled to the amount payable is likely to be far less than you think. For the latest statutory sick pay rates check out Statutory Sick Pay (SSP) : Overview - GOV.UK (www.gov.uk). There may be other benefits payable if you are disabled and these are detailed here Benefits and financial support if you're disabled or have a health condition - GOV.UK (www.gov.uk).

We refer any accident, sickness and unemployment cases to a specialist third party.

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, 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)

Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. For impartial information about insurance please visit the website at www.moneyadviceservice.org.uk