How Does Income Protection for Pilots Work?
There are four main policy options to consider when looking for Pilot Sick Pay Insurance, all of which will have a notable impact on the price of cover. These are:
- Sum assured
Depending on the insurer it is possible to receive anywhere from 50% to 70% of your gross (pre-tax) salary as a benefit each month.
- Your deferral period
How long you need to be off work before the policy starts paying out. Longer deferral periods reduce premiums notably compared with shorter ones. Note that for pilots many Income Protection providers impose minimum deferral periods.
- Your policy cease age
This is the age the protection ends. Most people align it to the age where they anticipate retiring, which is typically 65 for commercial pilots. However, not every insurer will offer cover right the way up until the age of 65, so it pays to know which insurer will work out best for you.
- Your payout length
Short-term plans pay out for a maximum of 1, 2 or 5 years per condition per claim, whereas long-term policies can continue paying out either until you are well enough to return to work or you reach your policy cease age.
Choosing the Best Premiums for You
There are three options to choose from when it comes to type of premiums for Executive Income Protection:
- Reviewable premiums
Are ‘reviewable’ as the insurer sees fit and so can rise in a variety of circumstances, such as if if the insurer has seen an increase in claims or based on economic factors. Reviewable premiums usually start out cheaper but are reviewed upwards and as such tend to work out more expensive across the life of the policy.
- Age-banded premiums
Also work out cheaper to begin with but then steadily rise each year. Unlike reviewable premiums, however, age-banded premiums can only rise by a preset amount laid out in your policy documents. These increases 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.
Index-Linking Your Benefit
Index-linking your Income Protection is a way to ensure that a fixed benefit isn’t eroded over time by inflation.
Think of the cost of a pint of milk today compared to 10 or 20 years ago – it’s gone up considerably! Inflation acts on the cost of all goods and services over time, making them more expensive and therefore harder to afford if your Income Protection benefit remains static.
Indexing your benefit means that it will move in lockstep with inflation to ensure that it will never be eroded in real terms.
Your Definition of Incapacity
Getting the right definition of incapacity is important because it’s how the insurer will determine if you’re fit for work and therefore able to make a claim.
There are three main definitions of incapacity to consider with Income Protection:
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 specific job role as a pilot.
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.
This could mean a pilot who is deemed unfit to work as a pilot may not be able to claim because they would be suited to doing another occupation, such as teaching in a flight simulator for example.
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.
It’s the most difficult to claim on and in general we’d recommend it’s best avoided.
Claiming On Pilot Disability Insurance
If you feel that you’re going to be out of work for longer than your deferred period, the first thing to do is make sure the insurer knows this.
While you won’t be able to claim your benefit until the end of your deferred period, starting the claims process as soon as you take leave from work allows your insurer can keep track of how long it has been since you stopped working and when to start paying a claim.
On claiming, you will need to provide your insurer with a completed claims form and evidence of the health condition preventing 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, which the insurer may write to your GP for permission to see.
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