Will being ill affect your income?

Unless you own your own business and have lots of people earning money for you on a long term basis, the answer is probably “Yes”.  But even then, will your staff members stay with you or continue to give their all if you’re not at the helm to give them guidance?

For the rest of us, an Income Protection Plan (IPP) could be the answer to the question, “Who will pay me if I am unable to work through sickness or disablement”?

There are many issues but let’s just highlight two.

Firstly, Some policies have a minimum deferred period, which is usually in line with the government’s definition of ‘long-term illness’ of four weeks.  While that’s financially manageable for some people, it is simply not realistic for everyone.

So that raises the question, if your had to wait four weeks with only limited funds before you can start claiming your income protection cover, will you still be able to meet all your pre-existing financial commitments?

If not, it’s worth considering a policy which has cover much sooner, or even from day one.

Alternatively, if you have a rainy-day fund to hand, you might prefer to extend your deferred period in order to reduce the monthly premium.

Secondly, another point is that traditionally, income protection has been sold on a long-term basis, which allows claims to be paid right up until the client’s retirement age.

But insurers are increasingly offering limited claim periods of one, two or five years, which can dramatically reduce premium costs.

While limited claim periods provide less comprehensive cover, you can still have multiple claims for different illnesses or injuries.

The importance of claim periods lies in giving you more choice and flexibility when it comes to choosing between income protection policies.

Not all clients would require, warrant or need a limited claim period, but it’s worth keeping your options open where the situation applies as there are potentially great savings to be made.

If you would like to explore this subject further, why not contact us for a chat?  There are a myriad of nuances to consider.

A New Type of Income Protection Plan. Would It Suit You? …Read On

Aviva has launched an income protection plan covering basic living costs that could help the self-employed and contractors.  The insurer’s Living Costs Protection product provides a monthly fixed benefit of between £500 and £1,500 to cover outgoings such as a mortgage, rent or bills if an individual cannot work due to illness or injury.

There is no limit to the number of claims a customer can make, and the payment period runs for up to 12 months for each individual claim.

Aviva will not conduct a financial assessment or apply deductions at the claim stage, and the customer will receive their selected benefit amount once Aviva has accepted their claim.  

Living Costs Protection could help with fluctuating incomes such as the self-employed and contractors, where the income-based benefit calculation required for traditional income protection at both point of sale and claim can be complex.   In addition, it could provide a more affordable option for those in higher-risk occupations.

In addition we are all living longer, and one thing we may have is time off work with illness which could prove disastrous to family income.  According to the Chartered Insurance Institute, a million people a year in the UK suffer a prolonged absence from work due to sickness, which can result in financial hardship – yet Aviva’s statistics show only 8 per cent of UK families hold some form of income protection.

This could be particularly attractive to the self-employed, who have a greater need than most for income protection given they have no extra support from an employer.