INCOME PROTECTION (PHI) FOR MAIN EARNER

Need for PHI
The family would probably suffer serious financial hardship if the main earner were disabled and could no longer carry on working. The bills would still have to be paid, but there would not be enough income.

Insurance companies set the maximum amount of Income Protection benefit allowed on their policies. For an employed person this is normally a percentage of salary and can include bonuses and employer sponsored benefits such as Private Medical Insurance and the value of other perks. The combination of your P60 and P11D issued by your employer has the information about your taxable income on which the benefit is based.

If you are self-employed the earnings are your share of pre-tax profits from your trade, profession or vocation after deduction of trading expenses in the 12 months before your ability to work became affected by illness or injury.

State benefits
The state benefits paid to a person who cannot work because of sickness or disability would not be enough to meet your needs. Incapacity Benefit is taxable and it is based on a number of strict objective tests which are applied in deciding whether it can be claimed. Extra benefits, such as Income Support, are only paid if the claimant's income is very low indeed and many benefits are paid more or less at the discretion of the Department for Work and Pensions.

Income Protection - higher priority than Critical Illness Cover
If the main priority is to provide an income if the main earner fell ill from virtually any cause then Income Protection is likely to be the priority. Income Protection providers will define incapacity as "you are unable by reason of illness or injury to perform the material and substantial duties of your occupation". Some providers will extend the clause to include "any occupation". Whilst this may provide a premium saving you should consider whether this is acceptable for your requirements.

Critical illness cover just provides a lump sum on the diagnosis of certain defined serious illnesses; although this would be welcome, it does not meet the need for long term security. Careful consideration to the extent and definitions of the critical illnesses covered should be taken into account. The definitions are available as part of the documents available by requesting a quotation.

GUIDANCE - INCOME PROTECTION (PHI) FOR MAIN EARNER

Guidance
The main earner should take out an income protection plan (permanent health insurance policy) for protection against the possibility of disability.

Level of cover
The level of cover you need is denoted on the quotation, which based on your total employment remuneration is the maximum that the insurance company is able to offer.

Deferment Period
The deferment period (the period of time after the start of your illness or injury which limits your ability to work) can be set as a period of weeks on the quotation. Your choice should allow for any earnings you expect to continue after you stop working, such as sick pay, or how long you are prepared to live on your savings.

Increasing cover
The plan should provide some protection against the effects of inflation. If selected, once the benefit starts to be paid, it would rise by a percentage or recognised index such as the annual increase in the retail price index. Furthermore, the level of cover would be increased by the insurance company by the corresponding amount; the premiums would increase each year to cover the cost of this growing level of cover. This increase can be decided on the quotation request.

Tax position
If a person claims under the plan because of disablement, the benefits would not be taxed.

Quotation
The quotation facility provides a quotation with the full terms and conditions from the various companies along with the key features and key facts documents showing the provider's charges and commission's payable

Read quotation, key features and key facts carefully
You should read the quotation and key features and key facts carefully; they contain important information about your rights and benefits under the policy.

Affordability
The premium should be readily affordable now and in the future, based on your own analysis of your income and expenditure.

Commitment to maintain protection contract
It is important to remember that you will be making a long term commitment to maintaining the Permanent Health Insurance cover under this plan. If you cease paying premiums after a short period of time the cover will lapse. To re-establish cover will require the full quotation and application process to be completed and be subject to the then current terms and conditions. If health has deteriorated for example, cover may no longer be available or special terms may be imposed It is important to remember that you will be making a long term commitment to maintaining the cover under this plan.

Permanent Health Insurance - choice of company
Goforcustomer has conducted research using tools such as Standard and Poors , a Financial Security rating agency to ensure the suitability of each provider on the quotation menu. The quotations show the providers in order of premium.

The choice of Guaranteed or Reviewable premiums
The quotation will allow you to choose guaranteed or reviewable or both types of premium when inputting your details. If you choose both, an assessment can be made when you get the comparison table of quotations from the various companies.

Income Protection - guaranteed premiums
The premiums are guaranteed to remain at the same level throughout the term of the policy. If you increase the cover in the future, the cost of the additional insurance is likely to be higher.

Reviewable premiums
The insurer can review the premiums at regular terms as shown in the individual key features and facts documents. If the company has more claims than expected, they might increase premium rates, but if the claims experience improves, premiums might be reduced. The advantage of these policies is that the premium rate is generally lower than for policies where the rate is guaranteed. The drawback is that it can rise.

Income protection with no investment content
There is no investment or savings element in the policies quoted, because it only pays out on disability during the period the plan is in force.

Exclusions
Exclusions are important and are detailed in the Key Features and Key Facts documents with each individual quotation.

Own occupation
The policy should provide cover against the insured person being unable to carry on his/her own occupation. This is preferable to policies that do not generally pay out if the insured person can carry on any occupation whatsoever.