During a recent financial review with a brand new client, something I carry out with brand new clients, I asked the question concerning whether he’d any income protection in place. I was quite surprised and impressed when he explained he had. It’s not usually the very first thing young people consider and he in his late twenties had it sorted…or so I thought. He quickly followed this with “I believe I’ve that with my mortgage protection “.Ah ha. It wasn’t initially I’d heard this and I’m sure it won’t function as 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 the least anyone scanning this on the difference between Income Protection and Serious illness.
Income protection is generally speaking a standalone policy. It is not usually linked to your mortgage although it can be used as a payment protection policy in certain cases. Serious illness cover or critical illness cover as additionally it is know could be either standalone or incorporated into 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 bank where he got his mortgage and at the time he was also offered serious illness cover being an option. This kind of policy can also be a lot cheaper when you are younger and so he opted to go with this for a relatively low premium.
Serious illness cover will pay out a lump sum on diagnosis of certainly one of a set of serious/ critical illnesses. Each company has their very own list and they differ slightly so you must always check that you’re getting the very best cover . The main illnesses that they’d all cover will be cancer, coronary attack and stroke but many list around 40 approximately different conditions. In case of a claim the insurance company would pay out a lump sum payment. You can use this to clear some cash off your mortgage, clear loans, fund necessary treatment you could require and for general living expenses in the event that you cannot work for an amount of time. Schwere Krankheiten Versicherung Generally this cover is great if you need money quickly to clear a loan or your mortgage or if the sickness is short-term and you are able to come back to work immediately after but when you had been struggling to work ever again the lump sum is typically not going to last very long.
Income protection on the other hand gives you a typical income in the case of you being unemployed for an extended period of time. It’d cover any illness or injury which leaves you struggling to work. Yes any illness or injury including those covered by serious illness cover. It will pay you right as much as retirement or and soon you come back to work. In some cases your employer may pay sick buy certain period although there’s no obligation in law. Seriously worthwhile considering is Income Protection insurance. Cover kicks in once you’re unemployed for more compared to the specified period which is often 8 weeks, 13 weeks, 26 weeks or 52 weeks. The longer waiting periods are well suited for anybody who might be paid for 6-12 months by their employer. You may have the income protection coincide with this such that it would kick in then ensuring no gap in your income. The maximum amount you can claim is 75% of your regular salary – This will add up quite quickly and could potentially account for 2 to 3 million if you had been never in a position to work again.