PHI (Permanent Health Insurance) Settlement Figure

wriglet

Hi David

It may also be worth finding out if there is any provision in the insurance policy to pay you direct which may give you some protection in a redundancy situation. One thing to be aware of is that as your company and the insurance company both probably want to get rid of you and they may be talking to each other. Perhaps a request under the data protection act to the insurance company to see your file would be a good idea and it also might show you how they went about calculating their settlement offer.

Debt_Free_Chick

Just to add to the debate ..... the face value of all the remaining payments to retirement age would not be payable in any event. What is reasonable is the discounted value of those payments. Look at it this way, what amount would need to be put aside now, in order to provide an income stream equal to 12 times the PHI payments, in ten years time? To arrive at this figure, one needs to determine an appropriate discount rate i.e. the return that could be achieved on investment of a lump sum now, in order to provide the payout in ten years time.

This discounting is the normal method used to calculate all sorts of settlement figures - not just those from insurance companies, but those awarded by the Courts too e.g. in loss of future earnings settlements.

The discount rate is a matter of "expert judgement", but there is some guidance given to the Courts, I believe.

An actuary could calculate different settlement figures based on different discount rates, but one would need a robust argument for claiming that a specific discount rate should be used. Note that a lower discount rate leads to a higher settlement figure.

You could pay an actuary specialising in this type of work to do some suggested figures for you, but that would cost money. You may find that any extra settlement figure simply pays for the actuary's work!

Haggling is the only no-cost option. If you're a skilled Excel user, you could play around with some different scenarios, though.

div_ad

Thanks. I'm still struggling with this because it's a tricky judgment call.

A couple of points.

My excel spreadsheets are overheating they have had so much work. In crude terms the offer looks better if you just take my current take home pay and multiply it by the years remaining, than it does if you add to the take home pay my and my employers pension payments, and the 5% annual rise in salary. Comparing it to the uinsurance company's costs makes you realise who th e winner is here (and it isn't me!)

The insurance company won't haggle. Full stop.

To get a legal view is going to cost about £800. More if they do anything! And still it wil be a judgment call.

D

Hippychick

I was in receipt of PHI and took voluntary redundancy, my PHI continued even though I was no longer 'employed' it just changed from my employers paying me to the insurance co so I would check it out.

Obviously your pension contributions would cease so would need an additional provision in that respect.

Debt_Free_Chick

div_ad wrote: »

Thanks. I'm still struggling with this because it's a tricky judgment call.

A couple of points.

My excel spreadsheets are overheating they have had so much work. In crude terms the offer looks better if you just take my current take home pay and multiply it by the years remaining, than it does if you add to the take home pay my and my employers pension payments, and the 5% annual rise in salary. Comparing it to the uinsurance company's costs makes you realise who th e winner is here (and it isn't me!)

The insurance company won't haggle. Full stop.

To get a legal view is going to cost about £800. More if they do anything! And still it wil be a judgment call.

D

The ins co's offer is presumably just for the 75% of salary payment?

If you accepted, then the company has to terminate your employment. How do they propose doing this? Compromise agreement? If so, that's your opportunity to negotiate a settlement with the company. But it's unlikely to include payment of pension contributions up to NRA.

chesterpump

I have some experience with this from dealing with insurers.

The first thing to remember is that a settlement is outside the terms of the policy and therefore there is no right to a settlement. Any settlement made is at the insurers discretion.

The policy is actually your employer's policy and you have no legal right to see it or to deal direct with the insurer. The monthly benefit is actually paid to your employer and they pay them on to you as part of your employment contract.

Most Employer Income Protection policies cease payments when employment ceases. They don't have to pay you direct if you are made redundant. Some insurers will give consideration to paying direct but it usually depends on how good a client the employer is.

I agree with Debt Free Chick, your negotiations should be with your employer as they will be the ones terminating your employment. I would ask what they would pay to you on top of what the insurer is offering. You should also check out what redundancy packages they are offering to employees still in work and ensure you are being offered a comparable amount based on your length of service etc.

div_ad

You are exactly right in what you say Chesterpump.

All my dealings are with my employer so giving me no chance to negotiate directly with the insurer. The insurer will stop paying once I leave my company.

I was taking the line you suggested and my employer has made a substantial top-up to encourage me to go.

Divad

div_ad

I accepted the deal.

After doing my own research and paying for expensive legal advice to confirm it, it appears that an employer can get away with making a disabled employee redundant while on PHI. Of course it could be fought through the courts but....

I was able to negotiate a little with my employer over the 'compromise agreement' but the insurance company refused to do so, or to clarify how they arrived at the payment.

The insurance company and my employer must feel they have done a very good deal in gettiing rid of a long-term expense for a relatively low cash payment. I suppose looking on the bright side I have some cash, and I can try to get a new job, or even do voluntary work which I couldn't before, and I don't have to be subjected to bullying/encouragement to return to work, and endless medicals. Also by jumping before I was pushed I have got money I might not have had (I'll never know).

I'm now expecting the Employment Service to contact me!


Thanks to all who advised, and I hope this thread may help others in the future.

D

2Sheds

div_ad wrote: »

I accepted the deal.

After doing my own research and paying for expensive legal advice to confirm it, it appears that an employer can get away with making a disabled employee redundant while on PHI. Of course it could be fought through the courts but....

I was able to negotiate a little with my employer over the 'compromise agreement' but the insurance company refused to do so, or to clarify how they arrived at the payment.

The insurance company and my employer must feel they have done a very good deal in gettiing rid of a long-term expense for a relatively low cash payment. I suppose looking on the bright side I have some cash, and I can try to get a new job, or even do voluntary work which I couldn't before, and I don't have to be subjected to bullying/encouragement to return to work, and endless medicals. Also by jumping before I was pushed I have got money I might not have had (I'll never know).

I'm now expecting the Employment Service to contact me!


Thanks to all who advised, and I hope this thread may help others in the future.

D

Hi div_ad

I'm in a simular situation and just had a lump sum offer on my PHI via my employer.

Can you let me know if the PHI insurance company lump sum was tax-free.


Thanks

2Sheds

Hi

Sorry to bump this up but can anyone advise.

I'm using the Union to negotiate with the company, but I'm a bit concerned they are too friendly nowdays and I'm in two minds whether to use a solicitor instead.

Thanks