During a recent financial review with a fresh client, something I carry out with new clients, I asked the question concerning whether he’d any income protection in place. I was quite surprised and impressed when he said he had. It’s not usually first thing young adults consider and this man in his late twenties had it sorted…or so I thought. He quickly followed this with “I do 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 a standalone policy. It’s not usually connected to your mortgage although it may be used as a payment protection policy in a few cases. Serious illness cover or critical illness cover as it’s also know can be either standalone or incorporated right into a life policy or mortgage protection policy. This is where in actuality the confusion above often arises. Schwere Krankheiten Versicherung This client specifically 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 being an option. This sort of policy can also be a great deal cheaper when you’re younger and so he opted to go with this for a relatively low premium.
Serious illness cover will shell out a lump sum on diagnosis of certainly one of a list of serious/ critical illnesses. Each company has their particular list and they differ slightly so you must check that you’re getting the very best cover. The main illnesses that they would all cover could be cancer, coronary arrest and stroke but many list around 40 approximately different conditions. In the case of a claim the insurance company would shell 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 cannot work for an amount of time. In general 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 can return to work immediately after but when you were struggling to work ever again the lump sum may not be likely to last very long.
Income protection on another hand provides you with a typical income in case of you being underemployed for an extended period of time. It would cover any illness or injury which leaves you struggling to work. Yes any illness or injury including those covered by serious illness cover. It can pay you right up to retirement or before you return to work. Sometimes your employer may pay sick buy a given period although there’s no obligation in law. Seriously worthwhile considering is Income Protection insurance. Cover kicks in once you’re underemployed for more than the specified period which may be 8 weeks, 13 weeks, 26 weeks or 52 weeks. The longer waiting periods are ideal for anybody who might be covered 6-12 months by their employer. You could have the income protection coincide with this such that it would kick in then ensuring no gap in your income. The most amount you are able to claim is 75% of one’s regular salary – This could mount up quite quickly and could potentially account fully for 2 to 3 million if you were never in a position to work again.