Income Protection Insurance
We have a no obligation on-line quotation service for Income Protection Insurance:
Please ensure you read the Key Features and other product information and fully understand the policy you are interested in. Please remember that the terms offered by each insurer will be different and therefore price should not be the sole consideration.
Remember your Client Declaration (all parties to sign), see our process for details. As with all online quotations of this type, the premiums quoted are estimates only and the actual premiums will depend on individual circumstances. If the eventual premium differs from the quotation, the policy will not commence without your agreement.
Please note that quotations are valid for only a limited period of time, generally 30 days. In addition, unless you proceed to the personal illustration stage, it will be necessary to requote. If your circumstances change between the quotation being generated and the policy going into force, the premium may be affected. This includes passing a birthday, half-birthday (6 months after your birthday), or in some cases a quarter birthday (3 or 9 months after your birthday).
What is Income Protection Insurance?
Income Protection Insurance policies are designed to replace lost income if you are unable to work, due to illness or accident, for more than a specified period of time. Once the benefits have started, they will continue until you return to work, die, or reach the expiry date of the contract. Typically the expiry date is selected to be the same as your retirement age. There is usually a restriction in the amount of cover based on a percentage of your income.
Income Protection Insurance is also known as income replacement or Permanent Health Insurance. You pay regular premiums to an insurance company, and subject to certain conditions, they will pay you a benefit if you are too ill to work. There is usually no limit to the number of claims that you can make.
Know the Product
Income Protection Insurance is a complex product and policies from different providers vary. This variation includes but is not limited to: income tests applied at the claims stage, whether state benefits are offset, how the policy interacts with employer sick pay/benefits, co-insurance clauses if you have more than one Income Protection policy, and the occupational basis on which policies are underwritten.
When choosing an Income Protection Policy a key consideration is the definition of incapacity. You must meet the specific definition in your policy in order for the policy to pay out. Insurance companies use different definitions of incapacity so you must check the policy documentation for specific definitions. The most common ones are:
'own occupation' - you can claim if you cannot carry out your own occupation;
'any suited occupation' - you can claim only if you cannot carry out your own occupation, or any other occupation to which you are suited (as defined in your policy);
'any occupation' - you can only claim if you cannot carry out any job;
'activities of daily living' - you can only claim if you cannot perform specified everyday tasks, e.g. washing and dressing; and
'activities of daily working' - you can only claim if you cannot perform specified work-related tasks, e.g. walking, communicating and using manual dexterity.
Some definitions may not be available for certain occupations. The definition that applies to you will impact on the cost of the policy.
Most insurance companies will offer a range of different income protection policies. Typically, you will pay more for policies offering greater cover. For example, 'own occupation' cover is likely to cost more than 'any occupation' cover. The cost will depend on a number of factors, including age, sex, occupation and medical history.
Benefits do not start to be paid until you have been unable to work for more than a specified period of time, known as the 'deferred period' or 'deferment period'. This period can range from 4 to 52 weeks. The longer the deferral, the lower the premium will be. You will probably wish to match this to your personal circumstances.
Length of cover
The term of the Income Protection policy (i.e. the age at which cover ceases) is usually also the maximum period for which benefit will be paid if you are too ill to work.
One option is to choose your normal retirement age, but the longer the policy term, the more expensive it is likely to be.
The amount you pay can be fixed or can change. You may have the following choices:
Guaranteed - the premiums are fixed. The insurer cannot make changes, except in agreed circumstances (e.g. to rise with inflation).
Reviewable - the insurer can change the amount you pay based on its overall claims experience, costs, etc. Typically, the changes do not depend on any claims you have made. Usually, the insurer cannot make changes during an initial period.
Renewable - premiums are set for a fixed period. After this, you have the right to continue your plan, and your insurance company will set the premium level for a further fixed period, based on your age at that time.
The type of rate you choose will affect the amount you pay.
You can choose whether the benefits under the policy remain constant or increase over time to help compensate for the effects of inflation. Different insurers offer different rates of increase. The premiums will increase in line with the increasing benefit.
Limits on the amount of cover
The maximum benefit you can choose will be based on a percentage of your normal earnings; this will vary between insurance companies. This is to provide an incentive to return to work, and because currently for individuals purchasing Income Protection, benefits are free of Income Tax. The quotation system on our site will give an indication of the maximum cover if you leave the 'Monthly Benefit Amount' box blank. Please note that this is an indication only, and the actual maximum will depend on your more detailed personal circumstances. If you make a claim, depending on the policy, the benefit actually paid may be restricted based on your recent earnings in for example the last 12 months.
Assessing your needs
To determine your need for Income Protection insurance, you will need to consider what might happen to your income and expenses if you were too ill to work. Relevant factors to consider will include:
Statutory Sick Pay or other arrangements made by your employer;
State benefits such as Long Term Incapacity Benefit and the possibility that these benefits may change in the future (see www.jobcentreplus.gov.uk for more information; note that the definition of incapacity for state benefits may not be the same as that used by an insurer);
other insurance cover that you have including that arranged by your employer;
- your savings & investments;
any pension that you are receiving or could receive in the future;
- alternative employment;
- any other sources of income;
your expenses now and how these might change if you become be too ill to work for a long period of time.
Income Protection Insurance may be unnecessary if your employer has a satisfactory long-term sick-pay scheme (considering both the amount, and for how long you would receive an income). Any insurer will limit the amount they will pay you. If your employer's scheme is adequate, this limit may mean that you would receive very little or nothing from an Income Protection Insurance policy.
To apply for a policy you will have to complete and sign a proposal form. This includes questions on your age, occupation and health. You must answer all questions truthfully. You must also inform the insurer of any change in your circumstances between completing the application and the policy going into force. If you do not, or if you fail to disclose all relevant information, your policy may not pay out. Once the insurance company has received this information, in some cases it may need additional information for underwriting purposes. In some cases your answers may result in you being refused cover or a change to the premium quoted. Once the policy is in force you have an ongoing duty to tell the insurance company about any changes in your circumstances.
Product providers included in the Clubfinance quote
Our on-line quotation service includes the following product providers:
- British Friendly
- Cirencester Friendly Society
- Legal & General
- The Exeter
How does Clubfinance provide such low quotes relative to even some of the 'Discount Life Insurance' companies?
First, we do not give advice or recommendations. Second, Clubfinance has a very simple policy of providing excellent value to our customers. We do this by rebating our initial commission to reduce the premium. We rebate up to 90% of initial commissions. We urge you obtain quotes from other companies, as we are confident of our low quotes.
It requires careful planning to choose the right insurance policy. It is important to read the Key Features and other information relating to each policy to understand the features, benefits and limitations of each. It is also important to make sure that your cover continues to suit your changing needs and circumstances.
This is a general overview only. You must read the Key Features and other product information specific to the policy you are considering. This overview does not represent and is not intended to represent advice or recommendation. If you need advice you must contact a firm that can provide the advice you need.
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Clubfinance Ltd is authorised and regulated by the Financial Conduct Authority (400139)