During a current financial review with a fresh client, something I carry out with new clients, I asked the question as to whether he’d any income protection in place. I was quite surprised and impressed when he explained he had. It’s not usually first thing young people think of and this person in his late twenties had it sorted…or so I thought. He quickly followed this with “I believe I’ve that with my mortgage protection “.Ah ha. It wasn’t the first time I’d heard this and I’m sure it won’t function as last. Indeed perhaps we as Financial Advisors and whoever sold him the first policy are to blame. And so I attempt my task for today to educate the typical population or at least anyone reading this on the difference between Income Protection and Serious illness.
Income protection is generally speaking a standalone policy. It’s not usually linked to your mortgage though it can be used as a payment protection policy in some cases. Serious illness cover or critical illness cover as it is also know can be either standalone or incorporated in to a life policy or mortgage protection policy. This is where the confusion above often arises. This client specifically had applied for a mortgage protection policy some years ago through the lender where he got his mortgage and at the time he was also offered serious illness cover being an option. This sort of policy can also be a lot cheaper when you are younger and so he opted to go with this for a somewhat low premium.
Serious illness cover will pay out a lump sum on diagnosis of one of a set of serious/ critical illnesses. Each company has their particular list and they differ slightly so you need to check always that you will be getting the most effective cover. The key illnesses that they’d all cover will be cancer, heart attack and stroke but many list around 40 roughly different conditions. In the case of a state the insurance company would pay out a lump sum payment. You can use this to clear some money off your mortgage, clear loans, fund necessary treatment you might require and for general living expenses if you are unable to work for an amount of time. Schwere Krankheiten Versicherung Generally speaking this cover is very good if you need money quickly to clear a loan or your mortgage or if the sickness is only short-term and you have the ability to return to work soon after but when you’re struggling to work ever again the lump sum is typically not going to last very long.
Income protection on one other hand gives you a regular income in the event of you being out of work for a lengthy amount of time. It would cover any illness or injury which leaves you struggling to work. Yes any illness or injury including those included in serious illness cover. It will pay you right up to retirement or before you return to work. In some instances your employer may pay sick buy a given period although there’s no obligation in law. Seriously worth taking into consideration is Income Protection insurance. Cover kicks in once you’re out of work for more than the specified period which may be 8 weeks, 13 weeks, 26 weeks or 52 weeks. The longer waiting periods are suitable for anyone who might be covered 6-12 months by their employer. You may have the income protection coincide with this so that it would kick in then ensuring no gap in your income. The most amount you are able to claim is 75% of one’s regular salary – This will accumulate quite quickly and could potentially account for 2 to 3 million if you’re never in a position to work again.