Hospitalisation benefits on income protection plans are designed to ease the immediate financial burden often borne by the family when a loved one is admitted to hospital, by providing a pay out if the life assured is hospitalised for an extended period of time, generally within their deferred period.
There are certain conditions and while self-harm, dangerous pursuits, war and drug abuse might sound like obvious exclusions on income protection policies’ hospitalisation benefits, however Protection Guru’s benchmarking tells different story.
Hospitalisation benefit is feature sometimes found within income protection policies that pay out a certain amount for each day spent in hospital, after a minimum period, typically seven days, has passed. The benefit is usually only available during the deferred period and will cease when this ends and the main benefit on the plan commences.
Of 23 leading income protection policies offered in the UK, just nine offer hospitalisation benefit. They are AIG, Aviva (Income Protection+ only), Cirencester Friendly (Income Assured Enhanced and Mr Earnings Protected), Legal & General (IPB and Rental), Royal London, VitalityLife Comprehensive and Zurich Select. Cirencester Friendly are a notable exception to the ‘during the deferred period’ rule as they will pay during this period and irrespective of an active income protection claim.
When quizzed on the level of exclusions found in their policies, which looked at self-inflicted injury, hazardous pursuits, alcohol abuse, drug abuse, war or civil commotion, or flying (other than in a commercial licensed aircraft), only one provider listed any of the aforementioned circumstances; Royal London, which said it would not cover self-inflicted injury.
Most of the plans offered hospitalisation benefit as contractual, with only Cirencester Friendly – for both its Income Assured Enhanced and My Earnings Protected plans, and Zurich Select not doing so. Cirencester – again, for both plans – is the only provider that includes hospitalisation benefit as a chargeable extra, increasing the premium if it is taken up.
Of the nine providers that offer the benefit, most insist on seven consecutive days spent in hospital in order for them to pay out, although Aviva asks for six consecutive nights, and Cirencester Friendly only calls for three consecutive nights hospitalisation to be covered.
Six of the nine plans opt to pay out a set monetary amount per night, with this ranging from £50, from Cirencester Friendly, to £100 for the other providers: AIG Your Life Plan; Aviva; Royal London; VitalityLife Comprehensive; and Zurich Select.
Legal & General takes a different approach, favouring a proportion of the monthly benefit, which it calculates as 1/30th of the monthly benefit, to a maximum nightly payment of £150.
Cirencester Friendly limits claimants to 21 consecutive nights in hospital on both its policies – Income Assured Enhanced and My Earnings Protected. Five plans – AIG Your Life Plan Income Protection, Aviva, Royal London, VitalityLife Comprehensive and Zurich Select will all pay out for 90 consecutive nights’ stay in hospital, while Legal & General, on both its standard and Rental IP plans, go one step further with a 91-night limit.
While choice is still fairly limited, one expects the market might grow as alleviating the unexpected financial pressure of an extended stay in hospital can only be a good thing. And for those who want to sleep more easily at night in their own beds, the additional benefit might be well worth paying for.
Overall each insurer’s offering has its own merits. Cirencester Friendly will start to pay their benefit during the deferred period and irrespective of an active income protection claim. Where the client has a high benefit, then Legal & General will pay more per night, however where the benefit is below £3,000, AIG, Aviva, Royal London, Vitality and Zurich will pay more.