PHI (Permanent Health Insurance) Settlement Figure

div_ad

Following disability I have been receiving 75% of my salary less incapacity benefit for some years. My policy pays out if I cannot fulfil my normal occupation. It is unlikely I ever will (though I am reviewed regularly and have been pressured to try and return to work).

I feel a bit trapped because I only get the benefit while employed by my company, and to return to a lesser job with them prejudices future payments (because I could be made redundant, or be deemed to have demonstrated that I was fit to do the old job). I enquired for a settlement figure.

The figure they offered is 38% of the amount I would receive from them if I stayed on the payments until retirement in 10 years.

Does anyone have a thought on how reasonable this is (I was expecting more!). Would it be tax free?

If I took the figure and left employment I would lose the employer's future pension contributions and my employment rights with them. The only benfit in taking the figure would be if I wanted/was able to get another job, or I suppose if I was to die soon, or my company went bust and the policy stopped paying out.

What factors should I consider?

Thanks for any help or thoughts.

Oscar_The_Grouch

This is a shameless push back to the top of the queue for someone else to comment, but I make no apologies.

I think the figure of 38% is low, but I don't work in PHI. I am interested and if anyone else has a view or experience in this field, I'd be pleased to hear from them.

dunstonh

You expect some reduction but 38% could just be their entry figure. Haggle it upwards. I havent had a haggle case for a very very long time so dont know how they are trending. However, it tends to be based more on the medical condition and the severity.

Oscar_The_Grouch

Thanks Dunstonh. Once again, a useful post from you.

It's difficult to speculate when you don't know all the figures, but in your experience what sort of percentages have you seen? I'm not involved in the PHI industry, so I have no idea whether 38% or 83% is reasonable!!

dunstonh

I havent seen that many so dont really know what the norm. I am more of an investment specialist. However, the ones that I have seen have been closer to 65%. That said, there was very little chance of consistent work on those cases of any occupation.

div_ad

Thanks for your thoughts. I can see it is complicated and there are lots of factors the insurers must take into account. Like me dying, a miraculous recovery, them bullying me back to work, or my company going bust.

At the level they offfered my instinct is to say no without even taking detailed advice. At 65% I would have been tempted.

I'm still open to more thoghts.

BTW who would be a good person to take advice from ? Are there any specialists in this field? Would a solicitor be better than a financial adviser?

David

div_ad

Hello again.

I wanted to update you on debvelopments.

My employer has just advised me 'without prejudice' that they will soon be experiencing redundancies as a result of a reorganisation and that I will be part of this exercise. They wanted me to know this (how kind) so that I can make my decision with all the facts at my disposal.

Clearly they are working towards a solution to their problem (me). It would be to their advantage if I took the deal as it would free them from cobntributing to my pension.

They think that were I to be made redundant my PHI benefit would cease.

div_ad

div_ad

My employer can make me redundant. Though they now say that what they said was 'without prejudice' and they have announced no plans to make me or anyone redundant at this time.

The payout if I won an industrial tribunal (and I might lose) would be less than the settlement offer.

I think my recourse would be a breach of contract suit. The case could go either way depending I think on how the company went about the selection for redundancy etc.

I'm not a lawyer or a finance expert. This is really about gambling.

the_bump

I have been claiming on Phi for a good number of years now. About 7 years ago I was offered a settlement figure of about 30%, this figure was given as non negotiable, I refused it and carried on claiming. Last year I was again given a settlement figure of about 60%, again non negotiable, I refused this one as well. I am still claiming on the ins.

As far as paying tax on the settlement figure, both times I went to see HMRC and they did not know whether it would be liable to tax and said they would look into it. After a couple of months of waiting I contacted them and they still could not tell me if it was taxable or not.

molely_2

Technically it is not "your policy" - your employer has a policy with the insurance company which provides them with funds to pay you during sickness. You still get paid under PAYE, I guess and are subject to tax/NI.

Any offer will allow for the time value of money and that the settlement is generally free of tax. It will also allow for the chance you may recover or die before the payment term expires. You need to take these things into account. Note the employer will save their own NI, pension contributions, and any other costs associated with your employment.

A general threat of redundancy is somewhat overbearing and you may want to take some legal advice from an employment specialist.

div_ad

Thanks Moley I think you have summarised this nicely. You don't work for my employer do you/

I have taken legal advice and clearly an employer can make you redundant in this situation. Until they actually do it and give their rationale its difficult to say what the result would be if one subsequently took legal action through employment or contract law. The threat of redundancy is of course couched in HR speak. They are just keeping me informed of the company context to ensure I am fully informed before I make a decision.

What I think is really bad is that the insurance company in this case are refusing to negotiate and have refused to divulge how they have arrived at the figure they have offered.