During a recently available financial review with a brand new 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 said he had. It’s not usually first thing young people think of and this guy in his late twenties had it sorted…or so I thought. He quickly followed this with “I think I have that with my mortgage protection “.Ah ha. It wasn’t initially I’d heard this and I’m sure it won’t function as the last. Indeed perhaps we as Financial Advisors and whoever sold him the first policy are to blame. And so I embark on my task for today to educate the overall population or at the very least anyone looking over this on the difference between Income Protection and Serious illness.
Income protection is generally speaking a standalone policy. It is not usually linked to your mortgage although it can be used as a payment protection policy in certain cases. Serious illness cover or critical illness cover as it’s also know can be either standalone or incorporated right into a life policy or mortgage protection policy. That is where in fact the confusion above often arises. This client in particular had taken out a mortgage protection policy some years back through the bank where he got his mortgage and during the time he was also offered serious illness cover as an option. This type of policy is also a lot cheaper when you are younger and so he opted to go with this for a comparatively low premium.
Serious illness cover will pay out a lump sum on diagnosis of certainly one of a set of serious/ critical illnesses. Each company has their very own list and they differ slightly so you should check always that you are getting the best cover. The main illnesses that they would all cover would be cancer, heart attack and stroke but many list around 40 roughly different conditions. Schwere Krankheiten Versicherung In case of a state the insurance company would pay out a lump sum payment. You could use this to clear some cash off your mortgage, clear loans, fund necessary treatment you might require or for general living expenses if you cannot work for a period of time. Generally speaking this cover is excellent if you want money quickly to clear a loan or your mortgage or if the sickness is only short-term and you have the ability to come back to work soon after but when you were unable to work ever again the lump sum may not be likely to last very long.
Income protection on another hand offers you a typical income in the case of you being out of work for a lengthy period of time. It’d cover any illness or injury which leaves you unable to work. Yes any illness or injury including those covered by serious illness cover. It will pay you right as much as retirement or before you come back to work. In some cases your employer may pay sick buy certain period although there’s no obligation in law. Seriously worthwhile considering 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 ideal for anyone who may be taken care of 6-12 months by their employer. You could have the income protection coincide with this such that it would start working then ensuring no gap in your income. The utmost amount you can claim is 75% of your regular salary – This may accumulate quite quickly and might take into account 2 to 3 million if you were never able to work again.