During a recently available financial review with a fresh client, something I carry out with new clients, I asked the question regarding whether he’d any income protection in place. I was quite surprised and impressed when he said he had. It’s not usually the very first thing young people consider and this man 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 the very first time I had heard this and I’m sure it won’t function as the last. Indeed perhaps we as Financial Advisors and whoever sold him the original policy are to blame. And so I attempt my task for today to educate the typical population or at the least anyone looking over this on the difference between Income Protection and Serious illness.
Income protection is in general a standalone policy. It is not usually linked to your mortgage though it can be utilized as a payment protection policy in some cases. Serious illness cover or critical illness cover as it’s also know may be either standalone or incorporated right into a life policy or mortgage protection policy. This really is where the confusion above often arises. This client specifically had taken out 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 as an option. This sort of policy is also a great deal cheaper if you are younger and so he opted to go with this particular for a relatively low premium.
Serious illness cover will pay out a lump sum on diagnosis of one of a set of serious/ critical illnesses. Each company has their own list and they differ slightly so you must check always that you will be getting the very best cover. The key illnesses that they would all cover will be cancer, heart attack and stroke but most list around 40 or so different conditions. In case of a claim the insurance company would pay out a lump sum payment. You could use this to clear some cash off your mortgage, clear loans, fund necessary treatment you could require or for general living expenses in the event that you are unable to work for an amount of time. Schwere Krankheiten Versicherung In general this cover is great if you need money quickly to clear a loan or your mortgage or if the sickness is only short-term and you are able to come back to work soon after but if you’re unable to work again the lump sum is typically not likely to last very long.
Income protection on the other hand provides you with a typical income in case of you being out of work for an extended period of time. It’d cover any illness or injury which leaves you unable to work. Yes any illness or injury including those covered by serious illness cover. It will probably pay you right up to retirement or before you come back to work. In some cases your employer may pay sick purchase 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 can be 8 weeks, 13 weeks, 26 weeks or 52 weeks. The longer waiting periods are ideal for anyone who might be taken care of 6-12 months by their employer. You could have the income protection coincide with this particular so that it would activate then ensuring no gap in your income. The most amount you can claim is 75% of your regular salary – This may accumulate quite quickly and might account for 2 to 3 million if you’re never in a position to work again.