Income Protection - any chance of lump sum?

dodgyeyes

Hi, I have an income protection policy via my employer which is due to pay until retirement - what's the chances of them offering a lump sum severance package? They offered one after two years which was quite low so is there any likelihood of another when we are now four+ years down the line. There is another 20+ years to go.

Also, does anyone know what would happen if this company collapsed like a few have done recently?

Thanks for your help in advance.

hambo81_2

If you are an IFA you're not a very good one dunstonh as you are incorrect.

I work in an employee benefits dept of a leading UK insurance company and can confirm a lump sum settlement (or 'commutation' as its known in the industry) can be offered.

The Employer is the policyholder so they have to approach the insurer and ask if they would be willing to settle the claim for a lump sum.

This payment would end the insurers liability with regards to that particular claim and no further monthly benefit would ever be payable.

Generally insurers will consider paying a lump sum (somewhat less than the overall liability) to settle a claim if it has more than 5 years to run and there is absolutely no hope of a return to the insured occupation.

I should point out tho that (again generally) if the absence is anything to do with a mental health condition then the answer will be no as it is not in the interest of the claimant to have a lump sum.

If you woudl now consider a lump sum, simply discuss it with your HR contact who should approach the insurer for you.

dodgyeyes

Thanks Hambo,

As i said in my first post I had already been offered a lump sum so was somewhat bemused by dunstonh comments! Thanks for the confirmation!

The initial compensation was around 10% of the overall payments the insurance company will have to pay until retirement and I presumed it was just because they thought I would take it and walk into another job. I thought this was a tiny amount in comparison to their overall costs. However, my illness (not mental!) means that my health fluctuates so much that I could not take on more employment so I assume I will be off til I'm 65. (I'm only in my early 40s now).

If a commutation is available how would they work it out and what % of their overall costs should I expect as an offer?

Thanks again Hambo for your advice.