I read a thought article earlier this week that suggested income protection plans were far too complicated and sales were still the poor relation to life and critical illness. Whilst it’s still true that IP sales do lag behind life and critical illness cover by some distance there is no doubt that if there are any positives to Covid-19 the one thing it has done is bring home the realization that protecting income is vitally important and it’s a subject being discussed by clients and advisers more than every before. In terms of it being a complicated product, there may be an argument for that, but I prefer to see it as comprehensive, flexible and adaptable to a client’s changing circumstances. In this latest in our Everything you need to know series we take a look at some of the product features of income protection contracts 

 

Short Term Income Protection

Income protection plans that offer shorter claim payment periods of between 1-5 years are referred to as Short Term Income protection (STIP) and are an excellent solution for clients who want to have income protection in place but where budget may be a prohibitive factor. But insurers differ in how they offer short term plans and it’s important to understand what the differences are

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Increasing cover when circumstances change

Nothing stays still for long, and that’s why it’s important to regularly review protection and ensure the benefits in place continue to match a client’s circumstances when ‘life happens’Guaranteed Insurability Options (GIOs) enable clients to increase the level of cover under a policy without further underwriting as long as a certain life event has happened. But which providers offer GIO for which events, and what limits apply to increases and what restrictions are in place?

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Being hospitalised for an extended period

Depending on the severity of a client’s condition, they may need to spend an extended period of time in hospital to treat their injury or illness. Where this happens there are many costs that the client and their family may face. Where this happens it is likely to be at the begining of incapacity and where a longer deferred period is in place the client will not be in receipt of income from their income protection plan whilst they wait for the benefit to start. Hospitalisation benefit provided by some insurers can help support the client and their family through this period and in this article we look at who offers this, when it can be claimed and for how long. 

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Support for clients whose income has reduced

When people take out an income protection policy the maximum monthly benefit they can receive will be a percentage of their current earnings. However, they might move to a different role or an employer that pays a bit less, especially due to a change of career, others might earn less after going part-time as they get older or juggling work with caring for children or elderly relatives, or in todays environment Covid-19 may have forced a change to a lower paid jobA minimum benefit guarantee is a feature that some insurers use to cushion people from the impact that a drop in earnings might have on their income protection benefits.

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A recurrance of the same or a similar illness or injury

For many injuries and illnesses recovering is just the first step. Once the client is able to return to work it is important that steps are taken to ensure that the risk of recurrance of the reason for incapacity is limited. Insurers provide many services to help with this, however there may be cases where the condition returns and causes the client to take more time off work. When this happens within a short space of time, insurers may be able to waive the deferred period via their linked claims feature and in this insight we look at the different approaches insurers take to this. 

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Watch out for future “Everything you need to know” pieces where each week we will cover a different topic and provide you with the information you need to know to discuss the topics with your clients.