How Does Accident & Sickness Insurance Work?
At the outset of the policy, you’ll have three major decisions to make:
- Choose your level of cover
Depending on the insurer, it is possible to cover anywhere from 50% to 70% of your gross (pre-tax) income.
- Choose your deferred period
This is the length of time you would need to be off work before the policy starts paying out. The shortest deferred period is 1 day up to 2 years, with shorter deferred periods costing significantly more than longer ones.
- Choose your payout length
Short-term plans can pay out for a maximum of 1, 2 or 5 years per condition, whereas long-term plans can continue paying out either until you are well enough to return to work or you reach the end of the policy life (typically your retirement).
Given the average length of a sickness insurance claim for LV is over 7 years we would generally recommend firstly looking at long-term protection.
Choose Your Premiums
You have three types of premiums open to you when choosing your Income Protection Insurance:
- Reviewable premiums
These premiums can be ‘reviewed’ by the insurer at any time, which means that they may rise in a number of circumstances, such as if the insurer has seen an increase in claims or based on economic factors. Such premiums often start out cheaper but are then reviewed upwards and usually work out more expensive over the life of the policy.
- Age-banded premiums
Age-banded premiums also work out cheaper at the start but then rise each year. Unlike reviewable premiums, age-banded premiums can only rise by a preset amount laid out in your policy documents and any rises are solely linked to your age and the increasing risk of you claiming as you get older.
- Guaranteed premiums
Work out more expensive initially, but cannot be adjusted over the life of the policy unless you yourself make any changes to the plan. This generally means guaranteed premiums work out cheaper over the life of the policy, especially if you took out cover when you were young and healthy, as premiums are locked in from the start and can’t change with time.
Your Definition of Incapacity
Different policies use different definitions of incapacity that define when you are entitled to claim benefits.
The best Accident and Sickness Insurance will cover you under an ‘own occupation’ definition of incapacity.
While this may not be available for all occupations, it is generally the preferred definition providing the most comprehensive cover.
Own Occupation Cover
Own occupation cover means that you will be entitled to your benefits as long as your injury or illness prevents you from working in your own specific job.
For example, if you are a surgeon and an injury prevents you from using your hand, you’ll be covered by your policy because you cannot work in your occupation with such an injury.
Policies that use a suited occupation definition of incapacity mean that in order to claim benefits, you have to be unable to undertake your current job role, or any other job where you may have experience or education to perform.
So where a surgeon with a hand injury may not be able to do their own job, they may not necessarily be able to claim under a ‘suited occupation’ definition because they would still be fit enough to work as a consultant or teach medicine.
Any Occupation / Work Tasks
This is a definition of incapacity that means you can only claim if you’re so totally unfit to work that you can’t work in any occupation / perform a set number of tasks required at most basic jobs.
This definition of incapacity is the most difficult to claim on and in general we’d recommend it’s best avoided.
How Do I Make a Claim?
Firstly, if you suffer an illness or injury that you believe will keep you out of work for longer than your deferred period you should notify your insurer immediately.
While you will not be able to claim your benefits until the end of your deferred period, it is vital that you make your claim as soon as you take leave from work so that your insurer can keep track of how long it has been since you stopped working.
When you make a claim, you will need to provide your insurer with a completed claims form and evidence of your health condition which prevents you from working, which is usually given in the form of a note from your GP.
Other evidence required might be in the form of notes from specialists / consultants or copies of diagnostic tests / scans – these should all be held within your medical records.
Once you’ve been out of work for longer than your deferred period, you’ll begin to receive a tax-free monthly income from the policy until either:
- You’re well enough to return to work
- You reach the end of your claims period (1, 2 or 5 years for short-term policies)
- Or the policy ends (typically at retirement, for long-term cover).
Neil’s Cancer Claim With British Friendly
Neil is a client of Drewberry and took out an Accident and Sickness Insurance policy with British Friendly. He was a member for 4 years before he needed to claim.
He became unwell and had pains in his stomach. After consulting his GP and having some further tests Neil was diagnosed with stage 2 Bowel Cancer and needed to make a claim.
🤕 Read More About Neil’s Claim