income protection for the non-working partner – who does what?
The need for income protection cover has become even more apparent during the Covid crisis, when the furlough scheme really brought to the fore the importance of the ability to maintain and income. Usually when advisers talk of protecting income they naturally gravitate to the income of the bread-winner. It makes sense. But when those families involve children for example it’s often true to say that the breadwinner can only go out to work to bring home the bacon because there is a non-working partner to care for the children and run the home, so it can be just as important to have protection in place for a “non-working” partner who keeps the family and household running. In this article we look at what providers offer in terms of cover should this vital member of the household be out of action.
With many “bread-winners” now working from home, sometimes for the first time, as the Coronavirus pandemic continues to bite, there are an increasingly large number of worried workers out there who have a new appreciation for everything their non-working partner does. Clients are asking their advisers what would happen should their non-working partner become ill or injured, hampering the worker of the family’s ability to do their job.
Our data shows that around two-thirds of income protection providers now offer housepersons cover. However, policies from all these providers include a limit to their houseperson cover.
Cirencester Friendly Income Assured Enhanced offers the least generous limit of £2,730pa – if you look at this in terms of the potential costs of childcare and domestic help, this may not go very far. At the other end of the scale with a cover limit of £20,000pa we have AIG and L&G. Below them, LV=, Vitality and Zurich offer £18,000pa
The need for childcare support appears to be the key driver behind the development of this product add-on for Vitality. All product versions offer an extra £100 per month per child that is dependent on the client up to an additional extra of £300 per month or 20% of the total benefit. This is not offered by any other provider.
When selecting income protection cover for a client, carefully considering the required deferral period is key and this is no different when considering houseperson cover. Where the main client needs to consider savings and their employer’s sick pay policy, for houseperson cover savings and benefit income are the main focus.
The need for short deferral periods is reflected by all providers, offering housepersons cover with a 4 week/one month deferred period basis. The chart shows a breakdown of the deferral periods available.
Another aspect to consider is what would happen should the main policyholder become a houseperson during the life of the contract. With more families taking it in turns to take on the role of main caregiver for children, pets and the house, advisers may want to discuss with their client if this is something they may consider in the future.
Our data shows that all providers allow clients to continue the cover if they become a houseperson during the life of the contract. However, existing cover levels may be restricted to a maximum monthly benefit (usually £1,500 per month) and often reduced to either a homemaker or activities of daily living definition of incapacity. Aviva, however will base the benefit on the clients’ earnings in the 12 months before they became a houseperson and use an own occupation definition (based on their previous occupation. They do however, limit the length of payment to 12 months.
AIG and L&G have high cover limits and Zurich have the highest range of deferred periods available – although in the context of this article it is hard to imagine a 2 year deferred period being needed.
Aviva feature well too in not applying limits to the benefit amount should the client become a houseperson during the life of their income protection plan (albeit payment is limit to 12 months).
The Coronavirus pandemic has highlighted just how much a large portion of the population rely on support from family and friends when it comes to childcare and help around the home. With these traditional avenues cut off by pandemic-related restrictions and lockdowns, the need to ensure clients have the financial provision to engage professional help should their “houseperson” become incapacitated is more important than ever.