Answered by Andrew Jenkinson
Income Protection with a split deferred period
In can be common for Doctors and other employees in the public sector it is common to have sick pay at 100% of salary for the first six months of incapacity and then 50% of salary for another six months, before receiving no further wages. Naturally, the same reasoning applies for other sick pay lengths.
Aligned your deferred pay with your sick pay
When setting up an income protection plan it is important not to over-insure by going over the insurers limit for cover (which ranges from 50% to 65% of gross earnings, depending on the insurer) as you would be paying additional premium for an extra level of benefit that would never be received.
For example, if the deferred period was set at six months and you covered up to the insurers limit then the insurer wouldn’t payout the full level of cover during the second six months of incapacity where you were still receiving 50% of your salary.
This is where a split deferred period comes into play. With a split deferred period one level of benefit would kick-in after 6 months to top-up the sick pay received and then the remainder of the cover would kick-in after one year when sick pay entitlement has ceased.
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