Income Protection

Q. If I opt for a long initial waiting period before benefits become due, will that mean lower premiums?

Yes, an income protection insurance policy with a 13 week waiting period will typically change lower premiums than one with a four-week one. This is because the insurance company will not have to pay benefit as quickly, and its costs will be lower. But there is no point opting for a long waiting period if this creates great financial hardship. The waiting period chosen should tie in with the end of sick pay from your employer, usually 28 weeks.

Q. Can benefits under an income protection increase each year or do they remain the same?

Some income protection insurance companies guarantee that the premium you pay when you take out the policy will never change unless you decide to increase the level of cover it provides. Other income protection insurers guarantee not to increase premiums for an initial period, typically five years, after which they may adjust - increase- them after reviewing the claims position across all their income protection insurance policies. If your premium is to be increased, you will be offered the option of reducing your cover rather than paying more.

If you have chosen to have your benefits increased each year, your premiums will increase to cover the new levels.

Q. Do premiums differ for men and women?

Yes. Statistics show that on average women are more likely to suffer ill health than men during their working lives. Consequently, income protection insurance premiums are higher for a woman than for a man of the same age and occupation.

Q. What other factors determine the size of income protection premiums I pay?

One is your occupation. Most income protectioninsurance companies classify you into one of four occupations grades. Class 1 embraces people in administrative or professional occupations and represent the lowest insurance risk. Such people pay the lowest premiums. In contrast Class 4 comprises people whose work involves heavy higher premiums. Insurance companies refuse in insure people in high-risk occupations such as steeplejacks.

Other factors include whether you smoke and how long you wish the policy to pay benefits. The shorter the payment period, the cheaper the premium.

Q. What happens if I change my job to one that is in a different class occupation?

It depends upon your income protection insurance company. Some offices will continue to provide cover while others may cancel it. It is vital to tell your income protection insurance company if you change jobs - failure to do so could invalidate a future claim for benefit.

Q. Are there illness that an income protection insurance policy will not cover?

Yes. Most income protection insurers exclude AIDs, self-inflicted injury; illness caused by drug or alcohol abuse, an act of war or criminal activity, pregnancy, childbirth, or associated complications.

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