Explaining advisory income protection insurance
- 13TH JULY 2007
Advisory income protection insurance, which pays out a regular tax-free income if you are unable to work as a result of long-term health problems, is capable of proving the best value form of health insurance on the market.
But numerous different insurers offer slight variations on the same theme and their small print can be highly confusing. As its title suggests, therefore, advisory income protection insurance should be bought in conjunction with professional advice.
Our service is able to offer prompt access to expert health insurance advisers who can recommend a policy best suited to your needs from a broad panel of leading insurers.
The adviser will initially conduct a brief 15 to 20 minute fact find by telephone to gain an understanding of your circumstances. They will then be in a position to recommend which insurer you should have your policy with and which important options on the policy you should take advantage of.
They may, for example, advise you to pay slightly extra to obtain premium rates that are guaranteed to remain fixed throughout the policy term or to secure cover that rises in line with inflation – facilities that are not available on other less complex products like long-term or short-term income protection insurance.
They will also pay particular attention to what length of ‘deferred period’ you should have in the event of a claim. This is the initial exclusion period that occurs between when you are unable to work and when your benefit payments actually start.
It can be possible to have a deferred period of anything between one month and one year – or even not to have one at all – but the shorter the deferred period the greater the cost. In most cases, therefore, advisers are likely to recommend having a deferred period of either three or six months.
Although our service can provide quality advice and remove the ‘hassle factor’ from the buying process, arranging cover can still prove an inconveniently lengthy process. This is because applicants for advisory income payment protection insurance are required to undergo an initial underwriting process to assess whether they have a greater than average chance of making a claim.
It may be possible to start a policy within a couple of days if you demonstrate a relatively clean medical history on your application form, but the application process can drag on for several weeks if the insurer decides that it needs to write to your GP or requires you to undergo an independent medical examination.
The fact that policyholders are quoted different premium rates according to factors such as occupation, age, gender and smoking habits, also means that some of the poorer risks may consider the premiums quoted to be on the steep side. They may therefore be better off with long-term income protection insurance, which charges all policyholders the same flat rate.
Long-term income protection insurance, which can pay out claims for up to 30 years, is simple to understand and does not need to be bought in conjunction with professional advice. A further major attraction is that, because it does not require any detailed underwriting to be conducted at outset, it can be taken out instantly.
