Permanent Health Insurance- Protection against incapacity explained
Long Term Incapacity is something that happens to other people, or is it?
People understand that the State is unable to provide enough financial support during incapacity, but do they fully understand the limitations involved? Many do not financially plan for this risk, which may be a big misconception - Incapacity and Disability benefits are low and in addition, the claimants would have to pass strict tests to qualify for long-term benefits.
People also fail the Personal Capability Assessment, meaning the individual would not qualify for the Incapacity Benefit and would have to find a means of income from elsewhere. Not everyone is entitled to the benefits either; it is dependent on their personal circumstances and whether they have contributed enough National Insurance. Even if they do qualify for the benefit, the payment may not even cover the weekly shopping bill, let alone all the other every-day financial commitments.
Of course, in the event of incapacity there are other options that may help, like utilising savings or looking to family for support, but it is very unlikely that they would be in a position to provide hassle free long-term adequate support for you.
Fortunately there is a solution to such a major problem and to describe it as major is not to exaggerate, if you do not have a fallback position. The answer is Income Replacement Cover (known as Permanent Health Insurance). Allow me to explain some of the details of Income Replacement Plans.
There are three components to an Income Replacement Plan. Firstly, the Deferred Period chosen before income commences, secondly, the amount of Benefit required and thirdly the Selected Retirement Age.
The level of premium for the required amount of benefit will depend on the type of plan and the company chosen. Some companies' offer guaranteed fixed premiums; other plans reserve the right to review premium levels. For a slightly higher premium the option is normally available to have the level of benefit automatically increased each year, in order to provide protection against the effects of inflation.
An important aspect of the plan for a claim to become payable, is the basis on which it will be considered. An own occupation basis is clearly preferable to a definition of disability that requires the inability to carry out any occupation. There are other definitions, which can also apply. The two other main factors affecting premiums are the deferred period chosen before benefit can commence and the selected retirement age. The deferred period options are typically 1, 3, 6 or 12 months (or split periods), and the selected retirement ages are between 50 and 65, with a few companies offering age 70.
The most important advantage of an Income Replacement plan is that once it is in force, it cannot be cancelled (assuming you continue to pay the premiums) and you can claim on as many occasions as necessary. Potentially a plan can pay out benefit, index linked each year continuously through to the retirement age of the life assured. Even a modest plan could potentially pay out a significant amount of money over its term.
The original question was:
Long Term Incapacity is something that happens to other people, or is it ?
The main question to ask yourself is:
How will I cope without an adequate income ?
Whether you are employed or self-employed, if you would like to know more please get in touch, naturally without obligation.
David Barnett IFA MIFP
DPB Independent Financial Services
David P. Barnett MIFP Principal
Tel/Fax No. 020 8958 9938
21 Highview Avenue,
Edgware,
Middx,
HA8 9TX
Mobile No. 07956 227 691
e-mail: ifa@DPBarnett.com
www.investments-in-mind.com
DPB Independent Financial Services is an Appointed Representative of Sesame Ltd.,
which is authorised and regulated by the Financial Services Authority.
Phone:
020 8958 9938 
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