When protecting your income, the level and quality of cover differ greatly, in particular when making a claim. Understanding the differences is imperative if you want to ensure you have the most suitable cover for you.
Income protection is widely recognised as the most comprehensive income cover available. It is designed to provide an income if you are unable to work due to accident, sickness or injury for a specified term or even up until your retirement.
The insurer will assess your health and occupation, clarifying any exclusions before the start of your cover. Understanding what you are and are not covered for provides greater assurance that the policy will pay out when you really need it.
No automatic exclusions – Most insurers remove their general exclusions. This means there aren’t any hidden medical conditions in the small print that they will not cover.
Flexibility – You can choose when you would need the income to start, how long the income should last, and when the cover should end. In addition, you have the option of fixed or reviewable premiums, level or inflation linked income.
It is vital to note that Income Protection is based on your occupational class and the ability to perform your daily duties. For example, if you are a deep sea fisherman, you have a more risky occupation than, let’s say, a receptionist. Therefore, it is highly important that your occupational class is correctly noted as this will affect you in the event of a claim.
Whilst this cover is often cheaper and easier to obtain than its big brother, Income Protection, in the large majority of cases, it is not the best solution.
Your benefit will normally cease after 12-60 months, regardless of whether you are capable of working beyond this.
The insurer will only assess you and your circumstances when it comes to making a claim. Because of this you can often find the more commonly claimed medical conditions excluded, such as back problems or mental illness. You will often find pre-existing medical conditions excluded.
This type of cover tends to be renewable, giving the insurer much greater control over your premiums, and most importantly, whether they continue to cover you.