Additional payments on Income Protection Plans – Everything you need to know
In reading this and the linked articles you will understand:
- The circumstances in which income protection providers can provide either faster or additional payments to clients
- Which providers pay what for Fracture cover, Trauma benefit, Terminal illnesses and hospitalised clients
- How providers support those caring for loved ones and help with funeral costs
- In all cases how providers differ and any limits or restrictions that apply
The role of income protection is to replace lost income if a clients is unable to work due to ill health or income. Across the market however, many plan’s offer features which depending on the scenario will provide either faster payment of income, an additional sum of money, an increase in the income paid or even payment of income even though the client is fully fit and still able to work themselves.
Fracture cover
A simple accident, and a broken bone, can easily lead to unforeseen financial stress particularly for those who have physically demanding occupations. Fractures can make it difficult or even impossible for clients to work for weeks or even months whilst they recover. Providers who offer Fracture Cover include it as an added benefit which will not affect the client’s ability to claim on the core cover.
Trauma benefit
Income protection plans are correctly thought of as providing a client with a replacement for their income if they become ill or injured and unable to work. But clients may be unaware that there are situations where they could claim an extra on top of their usual income protection benefit if they accidents that leave them with disabilities that are permanent and irreversible. Trauma benefit, which does exactly that, is a relatively new feature on income protection plans that some insurers provide to add value to their plans. In this article we explore how insurers provide additional support for clients in such circumstances.
Terminal Illness
When someone receives the devastating news that they do not have long to live, their emotional responses will vary. Feelings of shock and grief may be difficult for some people to comes to terms with and there is a risk that these feelings can turn into depression. Others may seem calm and matter of fact about it, wanting to live the rest of their lives as normally as they can, perhaps focusing on the things they would like to do while they are still able to. For some, the news may come as a relief, particularly if they have been living with extreme pain for a long time and their quality of life has been severely impacted by their condition over several years. But there are ways providers can help.
Hospitalisation Benefit
With human nature being what it is, we tend to think we will not be among those who are admitted to hospital due to an accident or illness each year. However, there will be some people who start the day at home as normal but will finish it in a hospital bed, through sudden illness or accident. Whilst Income Protection plans are designed to subsidise a loss of income due to illness or injury, the deferred period often means that the immediate costs of hospitalisation for the family have to be borne before any payment is received.
If insurers can step in and provide financial help while a client is in hospital, on top of the usual income protection benefit, this can make things a little easier for them and their families.
If any advisers have clients that have been hospitalised due to COVID-19 it may be worth checking if their policy includes this feature.
Carer benefit
The UK has an unpaid army of dedicated carers made up of mums, dads, brothers, sisters, aunties and uncles and friends who take it upon themselves to look after a family member, partner or friend who needs help because of their illness, frailty, disability, a mental health problem or an addiction and who cannot cope without their support.
Caring for someone can be demanding and make it difficult for carers to take time out for themselves and to juggle their care responsibilities with work, which will have financial implications. Providers offer to carers on income protection plans.
Funeral Cover
Income protection is not designed to provide a payout on death, as its purpose is to protect clients’ income rather than their lives. However, some insurers include death benefits in their income protection plans, which will help a client’s family if they sadly die during the policy term.
Advisers may find it helpful to know which insurers provide death benefits, and how they work, as clients may find it reassuring that this benefit can pay for their funeral or used to provide their family with extra money if the worst came to the worst.
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.
Things to reflect on for CPD:
- Identify your top two learning points from each of the six linked articles. How can you apply your learning to your client conversations for income protection?
- Reflect with your peers and discuss how you can relate the learning to your own processes for income protection meetings. How could / should you change your conversations to better explain the options and alternatives?
- Further required reading: This related Protection Guru article looks at income protection for the non-working partner and the propositions are quite different. Consider the restrictions on amounts paid, how providers support working clients who become housepersons during the plan term. Consider the differences in relation to different client demographics yourself or in discussion with your peers.
