Understanding Income Protection
Income Protection (also known as Permanent Health Insurance or PHI) provides a monthly tax-free (under current tax rules) replacement income, if a person covered by a policy is unable to work due to long-term illness or accidental injury1 which results in loss of earnings.
- replace a proportion of their lost earnings (typically up to 60% of gross earnings)
- protect some of their living expenses
- provide cover for housepersons; those engaged in full time household duties.
Many clients often overlook Income Protection, because they believe they’re already covered by their Critical Illness policy.
However, there are a number of key conditions, most notably back pain and mental illness, which Critical Illness does not usually cover. Therefore, in order to provide such clients with the protection they may need, Income Protection cover can be sold as complementary to Critical Illness cover.
- IP provides a monthly income, not just a one-off payment
- Total payments from IP can equate to more than that of a Critical Illness policy
Complexity is another issue for both intermediaries and clients alike, and there are a number of variables to consider, i.e. deferred period, percentage of earnings cover and termination age.
However we have developed a number of sales aids that you can use to help you illustrate how useful IP can be to your clients. Visit our dedicated pages on Income Protection Solutions to download these documents.
1. Some types of accidental injury and illness are not covered.