During a current financial review with a new client, something I carry out with brand new clients, I asked the question regarding whether he’d any income protection in place. I was quite surprised and impressed when he said he had. It’s not usually the very first thing teenagers consider and this man in his late twenties had it sorted…or so I thought. He quickly followed this with “I think I’ve that with my mortgage protection “.Ah ha. It wasn’t the very first time I had heard this and I’m sure it won’t be the last. Indeed perhaps we as Financial Advisors and whoever sold him the original policy are to blame. And so I set about my task for today to educate the general population or at least anyone scanning this on the difference between Income Protection and Serious illness.
Income protection is in general a standalone policy. It’s not usually linked to your mortgage although it can be utilized as a payment protection policy in certain cases. Serious illness cover or critical illness cover as it is also know may be either standalone or incorporated into a life policy or mortgage protection policy. That is where in actuality the confusion above often arises. This client in particular had applied for a mortgage protection policy some years back through the lender where he got his mortgage and at the time he was also offered serious illness cover being an option. This type of policy can also be a great deal cheaper when you are younger and so he opted to go with this specific for a relatively low premium.
Serious illness cover will shell out a lump sum on diagnosis of certainly one of a listing of serious/ critical illnesses. Each company has their own list and they differ slightly so you ought to check that you’re getting the best cover. Schwere Krankheiten Versicherung The key illnesses that they’d all cover could be cancer, coronary arrest and stroke but many list around 40 or so different conditions. In the event of a state the insurance company would shell 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 a period of time. In general this cover is very good if you want money quickly to clear a loan or your mortgage or if the illness is only short-term and you can go back to work soon after but if you’re struggling to work again the lump sum is probably not planning to last very long.
Income protection on another hand provides you with a regular income in case of you being underemployed for a long 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 can pay you right around retirement or and soon you go back to work. Sometimes your employer may pay sick pay for confirmed period although there’s no obligation in law. Seriously worth considering is Income Protection insurance. Cover kicks in once you’re underemployed for more than the specified period which can be 8 weeks, 13 weeks, 26 weeks or 52 weeks. The longer waiting periods are well suited for anybody who might be taken care of 6-12 months by their employer. You may have the income protection coincide with this specific so 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 will add up quite quickly and might account fully for 2 to 3 million if you’re never in a position to work again.