When looking for income protection insurance it is reasonable to wonder what is the best policy but this can be hard to pin down as it will depend on your individual circumstances and requirements. You may have savings for example which will allow you to increase the deferred period before a claim is made which will reduce the monthly premium you will pay. Each person’s financial circumstances differ and it is important to tailor a policy to match your individual needs.
However, if we consider which policy could be the best based on the plans coverage, and terms and conditions you should be able to narrow down your search considerably.
Which providers offer the best coverage for Income Protection insurance?
This really depends on whether you are looking for accident & sickness (AS) cover or whether you are looking for accident, sickness & unemployment (ASU) protection.
If you just require accident and sickness insurance then the best policies tend to have an Own Occupation Incapacity definition and the ability to pay out long term.
Own Occupation Incapacity Definition
This means that the income protection insurance plan will payout if you are unable to undertake your specific job due to any illness or injury. Lesser incapacity definitions include ‘suited occupation’ cover (where the insurer would assess your skills, experience and education and could decline a claim if they thought you were capable of undertaking another ‘suited’ job) and ‘activities of daily living / work tasks’ (where the insurer would make you undertake functional tests like walking or getting dressed before they would pay a claim).
It is important to take out a plan that provides ‘own occupation‘ incapacity protection so you are covered in your specific job role.
Ability to Payout Long-Term
Given LV’s average payout length in 2011 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). A basic payment protection plan may appear more attractive due to lower premiums but the benefit is only paid out for 12 months. This is of little use if you are long term sick and not likely to return to work.
Unemployment cover
When looking for accident, sickness and unemployment cover great care needs to be taken as most of these polices will be payment protection plans.
Payment protection plans often use the suited occupation definition of incapacity (where you are not actually covered in your own job role), have reviewable premiums (where the insurer has the right to change the amount they charge you) and can usually only payout for a maximum period of 12 months.
Read the small print
When deciding which income protection plan is best for you check the terms and conditions as there are some plans in the market that would switch from own occupation cover after 12 or 24 months of a claim. We generally do not recommend these plans in favour of policies that would use the own occupation incapacity definition throughout the entire length of a claim.
For Advice on Income Protection
For more information on your options please contact us.
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