Should Pilots Consider Loss of Licence Insurance or Income Protection?

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15-04-2021

An illness or injury can have a massive impact on a commercial pilot’s career.

A medical issue which in other professions may lead to more temporary impairment, or even have little to no impact on their ability to work, could easily result in the long-term or permanent inability to work for a pilot.

Loss of Licence Cover is well understood by most pilots as many will have it or know someone who does. However, it has its drawbacks which has resulted in many pilots taking out their own Income Protection Insurance.

Income Protection is designed to pay a replacement income if anything medically prevents you from doing your occupation rather than the illness / injury needing to be something that causes you to lose your licence.

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What is Loss of Licence Insurance?

Loss of License Insurance is a common insurance policy commercial pilots turn to given the stringent health requirements to be a pilot.

It provides financial cover if your licence is revoked due to medical reasons by offering a way for you to keep up with your bills while you can’t work.

Loss of Licence Insurance policies can provide either a lump sum payment if the license is lost permanently or a monthly income if the license is suspended to tide you over until you are well enough to return to work.

The Drawbacks of Pilots Loss of Licence Cover

One drawback of this cover is that it is typically limited to a fixed monetary amount. So you’ll either receive a fixed lump sum or a monthly income that is capped at the total equivalent of that lump sum.

If your policy insures you for £100,000 and you receive an income rather than a lump sum, you’ll only ever receive monthly income until the £100,000 threshold has been reached, after which the policy will cease and payouts will end.

This may not be sufficient if you still can’t work after the ‘pot’ of money has been used up.

Licence must be revoked
There is considerable variation in the contracts available; however, another drawback of these policies is the specific requirement that the licence must be either revoked or suspended in order to make a claim.

This would be problematic in the situation that you were ill or injured in a way that wasn’t serious enough to cause the temporary / permanent revocation of your licence (e.g. a bad back) but were nonetheless unable to work through that illness or injury.

Limited cover up to a maximum age
Furthermore, many policies on the market will limit the age up to which illness cover is provided. For example, some plans will cease illness cover at 55 and only provide bodily injury cover thereafter.

Given the retirement age for many commercial pilots is 65, this leaves you 10 years short of your retirement age at a point in your life where the likelihood of a claim is higher due to your increasing age.

What is Income Protection Insurance?

Income Protection Insurance is designed to pay a replacement income should you be unable to work due to any illness or injury.

There are no set requirements you have to meet, such as losing your licence, to be able to trigger a claim. As long as you can’t work as a pilot, you’ll be eligible to make a claim.

This could cover anything from mental health problems and bad backs all the way up to more serious conditions such as cancer, heart attacks and strokes.

Furthermore, depending on the severity of your medical condition, you are able to make both short- and long-term claims on the same policy. So if you’re unfortunate enough to suffer more than one period of ill health in your career, you can claim more than once on the same policy.

It doesn’t matter if you’re unable to work for 10 weeks or 10 years or how many times you need to claim – whatever your illness or injury, you’ll be able to make a claim after serving out your initial deferred period out of work.

This is opposed to Loss of Licence Insurance which, by its very nature, is a ‘one time only’ product, i.e. it will only pay out the once on the revocation of your licence and then end.

Opt for ‘Own Occupation’ Accident & Sickness Cover

For pilots looking into Income Protection it’s vital to ensure that the policy provides an ‘own occupation’ definition of incapacity, meaning the plan will pay out if you are unable to work as a pilot specifically due to ill health.

Avoid Suited Occupation Cover
Given the increased risk associated with a pilot losing their licence and therefore being unable to work through illness or injury compared with your average office worker, some Income Protection providers only offer the inferior ‘suited occupation’ definition to pilots.

This definition is much harder to claim on as there is the added requirement of you also being unable to do another job for which you have training or experience – for example as a pilot you may still be able to teach new pilots in a simulator or classroom and so a claim could potentially be declined.

Victoria Slade Independent Protection Expert at Drewberry

Pilots should be extremely cautious when looking at Income Protection options as few policies will be suitable for their needs given the limited number of insurers who offer comprehensive own occupation cover.

Victoria Slade
Independent Protection Expert at Drewberry

How Does Income Protection Work?

Firstly you need to make sure you take out a comprehensive Income Protection policy that covers you on an ‘own occupation’ basis. Such a policy will:

  • Cover up to 65% of your gross (pre-tax) earnings, with the benefit paid free from income tax.
  • Pay out as early as 4 weeks after ceasing work due to illness or injury
  • Cover you up to your preferred retirement age e.g. 65 years old, with no restrictions on the types of illnesses / injuries covered.
  • Pay out if anything medically prevents you from working as a pilot and will continue paying you right up until retirement if necessary.

Cheaper policies are available which will only pay out for a maximum of 1, 2 or 5 years per claim, although as a pilot given the higher risk of an illness / injury preventing you from ever working again this may not be long enough.

Get Expert Pilot Insurance Advice

Even the best Loss of Licence Insurance won’t cover you for all illnesses and injuries that could potentially end your career as a pilot.

At Drewberry we understand the market for Pilots Loss of Earnings Insurance and are well-placed to help you set-up the most suitable financial protection for you and your loved ones.

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 3062 and growing independent client reviews rating us at 4.92 / 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.
Tom Conner Director at Drewberry

We are always helping pilots with their protection needs so if it is getting a bit confusing please don’t hesitate to get in touch.

Either pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry

Very helpful from start to finish. Talked through all the points and gave great advice.

Darren Comer
16/05/2021
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