Permanent Health Insurance

Permanent Health Insurance (PHI) is the technical industry name for Income Protection. It’s designed to pay you a regular monthly income if you can’t work due to accident or sickness.

It allows you to keep up with all your essential expenditure, from mortgage / rent to utilities and groceries if you’re ever medically unable to work.

• You can protect up to 70% of your annual income.
• Choose cover which will pay out from as short as 1 week of illness or injury.
• The best Permanent Health Insurance will pay out long-term, right up until your retirement if you can never work again.
• In 2018, leading insurers Liverpool Victoria and Legal & General both paid 95% of valid Income Protection claims.

What Does Permanent Health Insurance Cover?

PHI is designed to protect against illnesses, injuries, accidents and sickness.

Essentially, if you develop a medical issue that prevents you from working for longer than your deferred period, you’ll be able to make claim on your policy .

What Isn’t Covered?

Permanent Health Cover doesn’t typically have any standard exclusions, with what you are and aren’t covered for being determined by your pre-existing medical history.

If you’ve suffered from a medical condition in the 5 years prior to taking out the policy your insurer is likely to look at your medical disclosure and choose to do one of three things:

• Exclude the condition from the policy
• Cover the condition for an additional premium
• Cover the condition on standard terms with no increased premium.

With some insurers it may be possible to serve a set period on the policy without receiving any advice, medication or treatment for a pre-existing condition and have it reassessed and potentially covered. This will be entirely at the insurer’s discretion.

When it comes to existing health conditions it is worth consulting with an expert adviser to ensure you get the most competitive terms.

We have direct access to the underwriters at the top UK insurers which puts us in a great position to help, please don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk

Do I Need Permanent Health Insurance?

Rather than thinking about whether or not PHI is worth it, it may make more sense to consider what would happen if you fell ill without it.

Could you rely on savings to tide you over if you were out of work?

Many of us – 2 in 5 respondents to Drewberry’s Wealth & Protection Survey said they had no more than £1,000 in savings – don’t have enough saved up to last for an extended period, especially given that average household expenditure is upwards of £500 per week.

If you can’t rely on savings, you may have some form of company sick pay. However, it’s important to distinguish between whether this is full sick pay (i.e. you’d receive from your employer exactly what you’d have been earning if you’re off work) or simply Statutory Sick Pay at £94.25 per week.

Government benefits aren’t particularly generous for those too ill to work, either. One of the main sickness benefits is Employment and Support Allowance at £73.10 per week – is this a realistic figure to live on?

Although other state benefits are available depending on the nature of your disability, these rarely add up to what you would have been receiving from work.

The Risk Of Incapacity

The risk of being out of work through accident or sickness is higher than many people would think. Meanwhile, the risk of long-term illness or injury is much also higher than people assume.

14.7% of the over-55s had been out of work for at least 6 months at some point during their careers, according to Drewberry’s 2018 Protection Survey.

How Does Permanent Health Insurance Work?

If you are unable to work as a result of accident or sickness, Permanent Health Cover pays out a monthly benefit of between 50% and 70% of your gross (pre-tax) earnings.

The PHI insurance would start to pay out after your chosen deferred period (sometimes known as a waiting period) and would continue to do so either until you’re fit for work or you reach the termination age of the policy, which is usually set at your retirement age.

There are three factors to consider when taking out Permanent Health Insurance that will significantly affect the scope as well as the cost of cover:

• How much you want to insure
  The amount of monthly income you’ll receive from the policy if you can’t work. While it may be tempting to simply go for the maximum you can insure, this could restrict the number of insurers you can get quotes from and push up the price of cover, so consider only covering essential expenditure.
• Deferral period
  How long you can wait before the policy kicks in and starts paying out an income. The longer the deferral period the lower the cost of cover, so consider how long you could last on employer sick pay or savings and set your deferral period accordingly to bring down the price of Permanent Health Insurance.
• Cease age
  The age you’ll be when the policy ends. Some insurers will run a policy up until the age of 70, but this will notably increase the cost compared to a policy that ends at 65 or even 60, so work out your expected retirement age and consider setting the end of your PHI cover in line with this.

Choosing the Right Premiums

When it comes to the type of premiums you’ll pay there are three options:

• Reviewable premiums
  An insurer withholds the right to ‘review’ these premiums as they see fit. This means they could rise for a number of reasons, from poor underlying economic performance data to a spike in claims the insurer experiences in a given year. It can make it hard to know what you’ll be paying for the policy year-on-year.
• Age-banded premiums
  Generally, these premiums start off cheaper but then increase with time to take into account your age and the growing risk of a claim as you get older. Unlike reviewable premiums, however, these can only increase in line with a special annual rate laid out in your policy documents.
• Guaranteed premiums
  Guaranteed for the life of the policy. These usually work out a little more expensive initially but are then fixed throughout the policy’s term. For a long-term Permanent Health Insurance policy that you intend to hold for many years, it generally works out cheaper over the life of the policy to consider guaranteed premiums, especially if you take the cover out when you’re young and healthy, as premiums can’t rise over time.

Your Definition of Incapacity

The definition of incapacity will have an impact on your ability to make a claim. Essentially, it outlines how ill or injured you need to be in terms of your ability to perform your duties at your job before being able to make a successful claim.

There are three main definitions of incapacity to choose from when setting up your PHI:

Own Occupation Cover

Own occupation cover means that you will be entitled to make a claim providing your injury or illness prevents you from working in your specific job role.

For example, an architect who injures their hand wouldn’t be able to complete technical drawings and so could make a claim.

Suited Occupation

The suited occupation definition of incapacity means that in order to make a successful claim, 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 an architect with a hand injury may not be able to do their own job, they may not necessarily be able to claim under this definition because have the skills and experience to do another job role they’re suited to.

Any Occupation / Work Tasks

This definition of incapacity means you can only claim if you’re so totally unfit to work that you can’t do any occupation / perform a set number of tasks required at most basic jobs, such as signing your name or typing.

This definition of incapacity is the most difficult to claim on and in general we’d recommend it is best avoided.

Indexation

Each year, the insurer will write to you to inform you of the change to the retail prices index and to say that, if you agree, your benefit will rise by that amount so that it doesn’t get eaten away by inflation. To compensate for the higher benefit, your premiums will also rise by a similar percentage.

What’s the Difference Between Permanent Health Insurance and Critical Illness Cover?

They may sound similar, but there’s quite a few key differences between Critical Illness Cover and Permanent Health Insurance that are worth highlighting so you’ve got the full picture before taking out either policy.

The biggest difference is that PHI pays out a regular, monthly income if you can’t work through illness or injury. On a long-term policy, you can claim this income as many times as you need to, for as long as you need to during the life of the policy.

Critical Illness Cover, on the other hand, pays out a cash lump sum on diagnosis of one of a specific list of critical illnesses, assuming you meet the severity laid out in the policy terms.

Other key differences between PHI and Critical Illness Cover are laid out in the table below.

Don’t Confuse PHI and PMI!

One letter, big difference! Permanent Health Insurance (PHI) is a policy that pays out for anything that medically prevents you from doing your job, replacing your lost wages while you’re unwell.

Private Medical Insurance (PMI) is an insurance policy designed to pay bills for private medical care in a private hospital.

Claiming on Permanent Health Insurance

Should you become ill or injured and need to make a claim on your PHI policy, use the following steps to make a claim:

• Step 1 :: An injury or illness prevents you form working and you are forced to take time off to recover.
• Step 2 :: As soon as you stop working, contact your insurer’s claims team. To successfully make a claim, you’ll typically need a completed claims form, written evidence of your medical condition, your policy number and potentially evidence of your salary prior to your health problem.
• Step 3 :: If your claim is approved, you will be required to wait out your policy’s deferred period before your insurer will begin paying out monthly benefits to replace your lost income.
• Step 4 :: Once your insurer has begun paying out your benefits, you will be able to claim until you recover or until you reach your policy’s cease age if you can never work again.

Neil’s Cancer Claim With British Friendly

Neil is a client of Drewberry and took out an Income Protection policy with British Friendly. He was a member for 4 years before he needed to claim.

He started to feel ill 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

How Much Does Permanent Health Insurance Cost?

The cost of your PHI insurance will depend on a range of factors. As well as the policy factors outlined above, there are also some personal factors that will impact the cost of cover.

Age and Health

Every policy is priced based on the risk you present to the insurer at the time you take out cover. Essentially, this means the younger and healthier you are, the more likely you are to get a favourable premium.

Smoker Status

If you’re a smoker, you’ll pay more than if you were a non-smoker with most providers. This is because of the higher risk of developing a health problem you face as a smoker.

Average Cost of Permanent Health Cover

In the below table, we’ve laid out the average monthly cost of Income Protection Insurance.

To work out the cost of cover, we’ve assumed:

• The individual is a healthy employed office worker
• They want a benefit of £1,500 a month
• They’re looking for an 8 week deferral period
• Their cease age will be age 65
• They’re looking for long-term cover
• They want to guarantee their premiums for the life of the policy.

The Income Protection quotes were calculated from our instant online quote engine and represent the cheapest PHI policy that matches the above criteria from across the entire UK market.

Compare Best UK Permanent Health Insurance Providers

AIG

AIG is one of only a handful Income Protection providers to offer cover for individuals with type 2 diabetes. It is also willing to offer diabetics guaranteed premiums and will not exclude diabetes in its policy, unlike other providers.

• Maximum coverage: 60% of the first £30,000 of your salary / 55% of salary between £30,000-£100,000 / 45% of any salary £100,000+
• Deferred periods: 4 / 8 / 13 / 26 / 52 weeks
• Maximum entry age: 54

Aviva

Aviva covers all policyholders with an own occupation definition of incapacity and, if you choose to return to work in a different occupation until you are well enough to return to your pre-incapacity occupation, Aviva will top up your reduced income with Back to Work Benefits.

• Maximum coverage: 55% of your pre-tax salary, up to a maximum of £240,000 per year.
• Deferred periods: 4-104 weeks (104 weeks is the longest available deferred period for UK Accident & Sickness policies)
• Maximum entry age: 59

British Friendly

British Friendly gives access to its Mutual Benefits program, which provides rewards such as vouchers for high street shops, discounted fitness tracking devices, emotional support services and online legal services.

• Maximum coverage: 70% of your pre-tax salary, up to a maximum of £45,000 per year.
• Deferred periods: Day 1 / 1 / 4 / 8 / 13 / 26 / 52 weeks
• Maximum entry age: 64
• One of the few insurers that will cover pilots on an own occupation basis

Cirencester Friendly

Cirencester Friendly provides you with a range of additional benefits and services, including a hospitalisation benefit and a Friendly Voice service that provides you with a personal nurse that you can contact for advice and emotional support.

• Maximum coverage: 65% of your pre-tax salary, up to a maximum of £65,000 per year.
• Deferred periods: Day 1 or 4 / 8/ 13 / 26 / 52 weeks
• Maximum entry age: 54

The Exeter

The Exeter is one of the few UK insurers that is able to offer own occupation cover to workers in higher risk occupations, although such policies only offer age banded premiums.

• Maximum coverage: 60% of your gross salary up to the first £100,000 and 40% of any additional income.
• Deferred periods: Day 1 / 1 week / 4 weeks / 8 weeks / 13 weeks / 26 weeks / 52 weeks
• Maximum entry age: 59

Legal & General

L&G Accident & Sickness Insurance comes with a free life cover element that pays out a maximum of 12 times your monthly benefit if you pass away while the policy is in force.

• Maximum coverage: 60% of your annual income before tax, up to a maximum of £200,000 per year.
• Deferred periods: 4 /13 / 26 / 52 weeks
• Maximum entry age: 60

Liverpool Victoria

LV Accident & Sickness Cover offers free access to unique LV Doctor Services, which include fast access to remote GP services, second opinion services and private prescriptions for policyholders and their children up to the age of 16.

• Maximum coverage: 60% of your annual income before tax, up to a maximum benefit of £12,500 per month
• Deferred periods: 1 month / 2 months / 3 months / 6 months / 12 months
• Maximum entry age: 59

Royal London

Royal London Accident & Sickness Insurance can include Fracture Cover, which pays out a lump sum of between £1,500 and £4,000 on top of any benefit you’d receive for being off work if you receive a fracture of a specified body part

• Maximum coverage: 65% of the first £15,000 income and 55% of the remainder, up to a maximum of £250,000 per year
• Deferred periods: 4 / 8 / 13 / 26 / 52 weeks
• Maximum entry age: 59

Shepherds Friendly

Shepherds Friendly allows you to apply to suspend cover and premium payments under your plan for a minimum continuous period of 3 months and up to a maximum continuous period of 24 months. This is known as ‘Career Break’ option.

• Maximum coverage: 70% of income up to £49,000 per year
• Deferred periods: Day 1 / 1 week/ 4 weeks / 8 weeks / 13 weeks / 26 weeks / 52 weeks
• Maximum entry age: 60

Vitality

Vitality provides a unique offering. While the core of its policy is similar to other providers’ offering, it also offers a unique set of additional benefits to those who participate in the Wellness / Optimiser programs that can include policy discounts and rewards.

• Maximum coverage: 60% of your earnings capped up to £2,500 per month and 50% of any earnings above, up to a maximum of £16,666 per month
• Deferred periods: 1 week / 1 / 3 / 6 / 12 months
• Maximum entry age: 59

Get Permanent Health Insurance Quotes & Expert Advice

When arranging Permanent Health Cover, it’s usually best to run through the ins and outs with an expert adviser. We are able to ensure your cover is set up correctly and compare all UK insurers to get you the best possible rates.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 2637 and growing independent client reviews rating us at 4.91 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

Taking out Income Protection Insurance can be confusing and there are a few important pitfalls you should try to avoid.

If you need any help please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry