Everything we aspire to revolves around maintaining a steady, and hopefully increasing, income stream. This is why Income Protection is an integral part of the financial planning process. With the paucity of available state benefits, you really do need a back-up plan.
Nick Barber, London
An income protection policy replaces a portion of your income, tax-free, in the event of you being unable to work due to illness. There is an initial waiting period prior to the onset of payment of the benefit and full policies pay to your retirement date or with more cost effective plans for 2 years.
These policies are comprehensively underwritten up front and do not contain standard exclusions. On average over 90% of claims are paid by insurers; they are very comprehensive. Where necessary, insurers will request a report from your Doctor or for you to undergo a medical examination, the costs of which are borne by the insurer.
A tax-free income is paid at claim stage, so we generally insure for no more than 50% of your gross Income. Standard occupations generally obtain an ‘Own Occupation’ definition for the insurance. Therefore, if you were unable to perform you own job the benefit can be paid. Higher risk occupations are usually assigned a definition relating to you being able to complete work related tasks.
This is a particularly important area should you be Self Employed and if you are a Director of a Limited Company we can set this up in a tax efficient manner to protect your Company earnings.
Although vilified in the press, the right policy from the right insurer can still provide valuable short-term cover, paying your mortgage in the event of Accident, Sickness or Redundancy. This cover can be especially effective for older clients and those in higher risk occupations. Care must be taken to acknowledge the fact that these policies generally operate using clauses to exclude previous and existing conditions.
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