Many of our clients have income protection which insures them and therefore their families against loss of earnings due to ill-health and disability. It’s seen as an integral part of their comprehensive financial protection planning. Unlike other types of protection, such as life assurance and critical illness insurance, at outset and at time of a claim the insured is financially underwritten to ensure that the policy benefits do not exceed a threshold of earnings, typically 50% or 60%. Definition of earnings is usually personal income being received, for example salary and dividends, rather than gross turnover in the case of a personal service limited company.
When reviewing existing plans therefore, we look not just at the competitiveness of the premium being paid and whether cover may be obtained cheaper elsewhere but also at the relevance of the plan to the client’s prevailing personal circumstances. This is important as sometimes due to, say, a change in employment status, the insurance value of the policy may have become obsolete. The benefit may no longer be appropriate and may be too low or even too high. In the case of the latter situation, in the event of a claim if the insurance is deemed to offer too much cover compared with the earnings of the policyholder, the excess will not be payable even though premiums will have been paid and will not be refundable.
Regular reviews are therefore imperative to ensure that all aspects of the insurance are fine-tuned to reflect the client’s individual circumstances. If you have an existing policy which you think may need to be assessed or if you wish to consider effecting this important insurance please feel free to call to discuss this further.