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What if I am ill
How could you pay the bills if you were off work through illness or injury? We all take it for granted that we wake up each day and go to work. However for many people this is no longer possible. As I have started cycling to work I know that every time I do it I am taking my life into my own hands with some of the drivers out there. Suddenly you realise how vulnerable you really are.
Perhaps if you are lucky your employer will provide some form of sick pay. This may last a number of weeks or up to a year. This may be of some benefit but what happens when that stops, if your employer doesn’t provide anything or you are self employed.
A simple solution is Income Protection. These are not to be confused with the payment protection plans we hear so much about these days. An Income Protection policy is sometimes referred to as Permanent Health Insurance.
Firstly the name Permanent means just that – the policy is written to retirement age and can be claimed on more than once.
What can the policy do?
The policy provides an income after a set period of time known as the deferred period. This deferred period can be used to take account of any employer benefit or simply to help reduce the costs by having a longer deferred period.
The policy will provide a tax-free income (normally up to 50% of your earnings but some providers can offer a bit more) until you return to work, reach retirement or die. If you return to work the benefit stops and you continue paying the premiums. Should you fall ill again in the future, benefits will be paid after the deferred period.
If you are unfortunate and can’t return to your normal occupation or can only return in a limited capacity then the policy can continue to pay out a reduced benefit on top of your wages.
Unlike Critical Illness Cover you don’t have to suffer a particular illness, however there are two ways the policy can be set up. Own Occupation as the name suggests means if you are unable to perform your own specific occupation then you are able to make a claim. The alternative is Any Occupation, which as I am sure you can imagine is a harder definition to claim on.
Many of us insure our cars, houses etc, we also save into Isas and Pensions yet all of these will become harder if not impossible to do if we loose our income. So if you want to speak to someone about Income Protection, call us now for a free no obligation consultation.
Chartered Financial Planner