Getting The Best Income Protection…
This really depends on whether you are looking for Accident & Sickness cover only or whether you are looking to include Unemployment Insurance.
If your primary concern is protecting your income against the risk of illness or injury, then the best policies tend to have the following features:
Own Occupation Incapacity Definition
An Own Occupation definition of incapacity means that the plan will payout if you are unable to undertake your specific job due to any illness or injury (please note that many Payment Protection Plans use the ‘suited occupation’ definition of incapacity).
Long-Term or Short Term Income Protection?
Short term income protection is considered a budget option as it will often have a maximum claim length of 2 years. Traditional long term income protection would continue to pay a claim right up to the end of the policy term if you are unable to return to work.
Given LV’s average payout length of 7 years, it makes sense to take out a plan that wouldn’t limit the length of time it can payout for (i.e. it can payout until retirement if you are unable to return to work).
Popular policies with these characteristics include plans provided by Liverpool Victoria (LV), Aviva and Exeter Family Friendly.
Including Unemployment Cover
Unemployment Cover is not usually offered under Income Protection plans, but there are some instances where it is available as an optional add-on. However, when looking for insurance policies that cover accident, sickness and unemployment, great care needs to be taken as many of these polices will be Payment Protection rather than Income Protection.
We normally advise that people looking to protect their income avoid purchasing PPI because often the protection they provide isn’t as comprehensive as a traditional Income Protection policy.
They often use the suited occupation definition of incapacity (which means you can’t claim if you are fit enough to work in other job roles), have reviewable premiums (where the insurer has the right to change the amount they charge you based on a range of factors) and can usually only payout for a maximum period of 12 or 24 months.
If you are certain that you want unemployment cover, it may be worthwhile considering purchasing a separate Unemployment Insurance policy. This will ensure that you can still claim on a long-term basis for accident and sickness as well as claim benefits on a short term basis if you are made redundant.