During a recently available financial review with a brand new client, something I carry out with all new clients, I asked the question regarding whether he had any income protection in place. I was quite surprised and impressed when he explained he had. It’s not usually the first thing teenagers consider and this guy in his late twenties had it sorted…or so I thought. He quickly followed this with “I believe I have 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 first policy are to blame. And so I embark on my task for today to educate the overall population or at least anyone scanning this on the difference between Income Protection and Serious illness.
Income protection is generally a standalone policy. It’s not usually associated with 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 may be either standalone or incorporated in to a life policy or mortgage protection policy. This really is where in fact the confusion above often arises. This client in particular had applied for a mortgage protection policy some years ago through the financial institution where he got his mortgage and at the time he was also offered serious illness cover being an option. This sort of policy can be a lot cheaper if you are younger and so he opted to go with this specific for a comparatively low premium.
Serious illness cover will shell out a lump sum on diagnosis of certainly one of a set of serious/ critical illnesses. Each company has their particular list and they differ slightly so you should always check that you will be getting the very best cover. The key illnesses that they’d all cover would be cancer, heart attack and stroke but many list around 40 or so different conditions. Schwere Krankheiten Versicherung In case of a state the insurance company would shell out a lump sum payment. You can use this to clear some cash off your mortgage, clear loans, fund necessary treatment you might require and for general living expenses in the event that you are unable to benefit an amount of time. In general this cover is great 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 immediately after but if you had been struggling to work again the lump sum may not be likely to last very long.
Income protection on the other hand provides you with a typical income in the event of you being underemployed for a lengthy amount of time. It’d 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 as much as retirement or before you go back to work. In some instances your employer may pay sick pay for certain period although there’s no obligation in law. Seriously worth taking into consideration is Income Protection insurance. Cover kicks in once you’re underemployed for more compared to 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 paid for 6-12 months by their employer. You can have the income protection coincide with this specific so that it would kick in then ensuring no gap in your income. The utmost amount you are able to claim is 75% of your regular salary – This will add up quite quickly and might take into account 2 to 3 million if you had been never in a position to work again.