Permanent Health Insurance (PHI) is designed to pay a monthly replacement income to you should you be off work with an illness or injury. It is the correct name for what you may know as;
– Income Replacement Insurance
– Income Protection Insurance
– Long-term Disability Insurance
– Disability Income Insurance
– Personal Disability Insurance
Statutory Sick Pay (SSP) of £88.45 (2015/16) is usually paid by your employer for up to 28 weeks, but is unlikely to provide adequate income protection in the event of long-term illness. Although it’s not something we like to think about, official figures indicate that long-term illness affects more than 670,000 men aged between 40 and 64 every year and as a result they are absent from work for more than six months.
Permanent Health Insurance policies will pay a regular income designed to protect your standard of living if you suffer long-term sickness/injury or disability. Forget about the big diseases, think backache, stress & other illnesses often not even considered as being life affecting from a sickness perspective.
PHI benefits usually starts after an initial waiting period of 4, 13, 26 or 52 weeks (you would choose this deferred period out outset to suit your circumstances) and it is payable until you return to work, die or the policy term expires, whichever happens first. This type of cover is called ‘permanent’ because the insurer cannot cancel the policy no matter how often you claim for benefit however, policies usually expire when the policyholder reaches 60 or 65.
It’s important to note that no two PHI policies are alike because exclusions vary and cover differs widely and so when you are looking into this type of plan it’s vital you understand exactly what it is that the plan covers you for.
So how much will it cost?
The cost of a PHI plan will vary from person to person. There are factors that will affect the price of a premium including;
Gender – Statistics show that on average women are more likely to suffer ill health than men during their working lives and therefore, premiums are higher for a woman than for a man of the same age and occupation.
Smokers – A no brainer really, non-smokers will pay less per month than smokers.
Occupation – Companies will often refuse to insure people in very high-risk occupations and the less risky the nature of your occupation the cheaper the premium will be. If you should change your occupation in the future some companies will continue to provide cover while others may cancel it (depending on the nature of the job). It’s vital you tell your insurance company if you start a new job as failure to do so could invalidate any future claim.
Waiting period – Policies set up with a 13-week waiting period will typically offer lower premiums than one with a 4-week wait. When setting up the plan initially, the waiting period chosen should tie in with the end of sick pay from your employer.
Payment of Benefits
Should the time arise where you need to make a claim, you should contact the insurance company as soon as possible, don’t wait for any deferred period to lapse. You’ll need to complete a claim form and then the company will check your eligibility for benefit. The provider may wish to obtain a medical report from your doctor or carry out an independent medical examination. It will also assess the maximum benefit to which you are entitled and may ask you for proof of your income.
Once you are well enough to go back to work you’ll need to contact your insurer who will then stop benefit payments. If you go back to work on a part-time basis or take a lower-paid job, your insurer may continue to pay you reduced benefit.
I’m self-employed, am I eligible?
Yes! PHI is available for both the self-employed and for directors of limited companies.
Self-employed – it is important to note that cover needs to be based upon profit before tax (which is classed by insurers as your gross earnings) rather than the revenue generated by yourself.
Directors – the insurance provider will consider your salary and dividends.
If you think this type of plan may be of benefit to you, it’s advisable to speak to a Financial Adviser, this way you’ll be able to talk through your options and the Adviser can ensure that the plan is tailored to suit your individual needs.
If you would like to find out more about Permanent Health Insurance or any other form of protection please feel free to complete the form below and we will get back to you as soon as we can. Should you want general financial advice you can complete the same form.
Please note that we do not provide financial advice over the telephone.