During a recent financial review with a 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 said he had. It’s not usually first thing young people think about and this person 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’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 attempt my task for today to educate the typical population or at least anyone reading this on the difference between Income Protection and Serious illness.
Income protection is generally speaking a standalone policy. It is not usually connected 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 in to a life policy or mortgage protection policy. That is where the confusion above often arises. This client in particular had taken out a mortgage protection policy some years ago through the lender where he got his mortgage and at the time he was also offered serious illness cover as an option. This kind of policy can also be a great deal cheaper if you are younger and so he opted to go with this particular for a somewhat low premium.
Serious illness cover will pay out a lump sum on diagnosis of among a listing 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 best cover. The main illnesses that they would all cover would be cancer, heart attack and stroke but many list around 40 approximately different conditions. In case of a state the insurance company would pay out a lump sum payment. You could utilize this to clear some funds off your mortgage, clear loans, fund necessary treatment you might require and for general living expenses if you are unable to benefit an amount of time. Schwere Krankheiten Versicherung Generally speaking this cover is excellent if you need money quickly to clear a loan or your mortgage or if the condition is only short-term and you have the ability to come back to work immediately after but if you had been struggling to work ever again the lump sum is probably not going to last very long.
Income protection on another hand gives you a regular income in case of you being out of work for a long period 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 probably pay you right up to retirement or until you come back to work. In some instances your employer may pay sick pay for certain period although there’s no obligation in law. Seriously worth considering is Income Protection insurance. Cover kicks in once you’re out of work for more compared to the specified period which is often 8 weeks, 13 weeks, 26 weeks or 52 weeks. The longer waiting periods are perfect for anybody who might be taken care of 6-12 months by their employer. You can have the income protection coincide with this particular so that it would kick in then ensuring no gap in your income. The most amount you are able to claim is 75% of your regular salary – This can add up quite quickly and could potentially account for 2 to 3 million if you had been never able to work again.