Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

 

Don’t get caught out when buying Income Protection

Written by:
Andrew Jenkinson
Director at Drewberry™

When buying income protection it is vitally important to look under the bonnet to find out what the policy actually covers. There is a huge difference between policies with regards to the definition of incapacity they will use to assess your claim.

The most comprehensive type of income protection pays out if you cannot undertake the main duties of your specific job due to any medical condition, this is called ‘Own Occupation’ income protection.

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Watch out for Suited Occupation cover

Many online comparison websites sell plans where the insurer would assess your experience, education or training to see if you are capable of undertaking another job before paying a claim, this is called ‘Suited Occupation’ income protection.

Many of these Suited Occupation policies are provided by payment protection insurers and the vast majority of them do not publish their payout rates.

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Making sure you get Own Occupation cover…

Most reputable Own Occupation income protection insurers publish their claims statistics each year and typically payout over 90% of all claims made

Get a quote or contact us on 0208 432 7333 if you would like to be provided with a personal recommendation for a policy that will cover you in your own occupation.

It is important to be very wary of polices that appear ‘cheap’ and check whether they cover you for your own or a suited occupation. At Drewberry we tend only to recommend own occupation cover, you can try our income protection occupation definition tool to see how likely our insurers are to offer you own occupation cover.

 

What does a Suited Occupation definition look like?

If you are taking out income protection it is important to have a look in the policy terms and conditions to see what ‘definition of incapacity’ is being used.

Many policies do not offer own occupation cover (where you are covered for your specific type of work) but rather use the suited occupation incapacity definition, which is often worded like below:

“A bodily injury/illness or physical or mental condition that prevents you from carrying out your normal occupation or any other work you are reasonably able to do given your experience, education or training and for which you are under the continuing care of a doctor.”

An Own Occupation incapacity definition usually includes the first part of the sentence above but not the part from ‘or any other work’ in bold.

Suited Occupation – Examples of claims that could be declined:

  • A builder who can no longer undertake manual work being told that given their experience they could work in a DIY store instead
  • A surgeon that damages a hand being told that they could teach medicine instead given their education
  • A pilot that can no longer fly given a medical condition, such as the loss of sight in an eye, being told they could teach navigation to new trainees
  • A sales professional that could not work due to stress and anxiety being told they could undertake a less stressful office role given their experience
 

Which insurers publish their claim payout rates?

It is very uncommon for payment protection insurance (PPI) providers publish their claims payment rates. Read into that how you will but compare it to the mainstream income protection providers that typically publish their payout rates every year.

To see the individual payout rates for various income protection insurers please see use our tool below. The average payout rate (claims paid as a proportion of total claims) across all income protection insurers was 92.9% in 2014, as published by the Association of British Insurers (ABI) here.

Unfortunately, our 2014 Protection Survey found that 1 in 6 people look for incapacity protection when they are already ill or injured, and in a lot of cases it is too late to take out cover.

 

Insurer Claims Statistics

 

When choosing our personal protection we want to know it is going to pay out when we need it to.

By choosing a product or specific insurer from the menu below you will be able to view the claims payout rates for all of the main UK insurers for income protection, life insurance and critical illness insurance.

Insurer
2015
Percentage of Successful Claims
2016
Percentage of Successful Claims
2017
Percentage of Successful Claims
Critical Illness Insurance
Zurich
92%
90%
95%
Aegon
97%
95%
94%
Aviva
92.5%
92.3%
93.2%
AIG
91.4%
92.3%
93%
Legal & General
91.5%
92.6%
92%
Vitality Life
-
-
92%
Royal London
93%
92.2%
91.2%
Liverpool Victoria
91%
90%
88%
Friends Life
93%
-
-
Income Protection
Aegon
85%
85%
96%
Liverpool Victoria
92%
90%
96%
Vitality Life
-
94%
96%
Holloway Friendly
96.9%
98%
96%
Shepherds Friendly
97.6%
97%
96%
Legal & General
95%
94.4%
95%
Cirencester Friendly
94%
94%
94.7%
British Friendly
97.8%
97%
92.4%
Royal London
94%
95.6%
92.1%
Exeter
94%
94%
91%
Aviva
92.4%
92.6%
88.8%
Zurich
87%
85%
87%
Friends Life
84%
-
-
Life Insurance
Zurich
98.5%
98%
99%
Vitality Life
99%
99%
99%
AIG
92.2%
95%
99%
Scottish Widows
98.9%
99.4%
98.99%
Aviva
98.9%
98.9%
98.9%
Legal & General
97.9%
98.6%
98%
Aegon
98%
98%
98%
Royal London
98%
96.8%
97.3%
Liverpool Victoria
97%
98%
95%
Friends Life
99%
-
-
get the right income protection

We are here to help

Income protection is a very important policy for anyone that would struggle financially if they lost their income due to illness or injury, and as such it is vital ensure that you are confident about the quality of policy you are taking out.

If you are looking for help please do not hesitate to pop us a call on 02084327333 or email us at help@drewberry.co.uk.

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We always recommend that our clients take out a policy with own occupation cover. The policy should be able to payout for a number of years (so the policy covers the risk of medium and long-term illness or injury) and it is taken out with a reputable insurer with a proven track record.

My own personal plan is ‘Own Occupation’ because I would not want to run the risk of my claim being declined because I didn’t meet the definition.

Robert Harvey
Independent Protection Expert at Drewberry Insurance

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