Income Protection Insurance - Multiple Policies?

K7683

Can you have more than one income protection policy or does that count as double insuring and one would void the other?

Example - I have a policy to cover the first 50% (gross) of my income. Could I then take a policy for another amount to cover the difference so in the event of becomming unemployed both insurances together would still give me the same take home?

I ask beause I always assumed you could not do this but have recently been told by an insurer there is nothing to stop me doing this as the second policy would cover a diffent amount/part of my salary and therefore would add to rather than overlap the existing policy. I am not sure this is right and don't want to take a second policy if it would harm my current one in the event of ever having to claim.

Advice appreciated.

stephenni1971

Can you have more than one income protection policy or does that count as double insuring and one would void the other?

There are restrictions to the maximum amount you can claim of your normal salary. You cannot combine two or more policies to exceed this.

The insurer you spoke to was wrong. You are not insuring different sections of your income but rather a percentage of the whole.

ACG

Different insurers will cover different amounts.

some limit it to 50% some limit it to 70-75%. You can have 2 seperate policies so long as it falls within the insurers guidelines otherwise you will be over insured and paying for something you will never be able to claim on.

marshallka

So what about PHI paying 75% gross income and a MPPI that take you 30% over your gross income (claiming in total over 100% of your gross income and nearer 130%,) WHEN the policies both pay over to you first and are not actually "attached" to the Mortgage as they cover your mortgage and other related expenses???? Both policies would be with different insurers though!!!

kingstreet

I'd read the T&Cs for the PHI. IIRC, if your employer is paying you anything, your PHI benefit is scaled down, as it would be for example under proportionate or rehabilitation benefit.

I would expect something similar if you have two policies.

Scottish Provident's disability income benefit rules, for example;-

We will restrict the claim value to an amount which, together
with income from employment and any other income protection
and/or accident, sickness and unemployment plans, does not
exceed 50% of your pre-disability gross salary or earned income.

Exeter Family;-

When calculating your benefit level on your total income,
please note that if you claim, we will take into account other
forms of income when calculating how much we can pay
you. You should take the following income into account when
deciding your benefit level:
• Any payments you receive from your employer eg.
Company Sick Pay (but not Statutory Sick Pay)
• Any continuing income or dividends from your business
• Pension payments (unless you received these before your
policy started)
• Other insurance payments which are paid, as a result of
illness, on a regular basis to you or to a financial institution
on your behalf
• State benefits (after 52 weeks of a claim)

shr_2

Hi

Following on from the previous replies...

I have 2 policies, one with a 50% limit, and another with a 75% limit. Does this mean that claiming on both will require them both to impose a 50% limit (i.e. 50% of pre-disability / illness earnings from both insurance policies combined)?

If so, this doesn't feel fair or right... - it feels like the limits of one policy are changing the conditions of another.

Thanks in advance for any help with this.

ACG

No, one policy would pay the 50% and your other policy would pay about 10-15% of your income - overall paying about 60-65%.

It wouldnt work exactly like that but it gives you an idea, at claim stage they will ask if your getting any income from anywhere else (this would include any other insurances).

So if you have 2 policies cover 50% of your income each, you are over insured and paying for something you will never be able to claim on. They would both probably pay out about 30% of your income each.

shr_2

Thanks ACG.

Just to double check... One of my policies is with Scot Prov, which, as noted in one of the posts above, says that their insurance pay out when combined with pay outs from other income protection policies etc., cannot exceed 50% of my pre-illness income.

So I don't quite understand how I am then allowed to receive a total of up to 60 / 65% of my pre-illness income under that clause. It seems to go against their policy conditions ?

(The other policy is similar but has a limit of 75%.)

I assume there has to be a process of negotiation between the two insurance providers on how much they each contribute, and what the overall limit will actually be ? Is this a common scenario in income protection claims ?

ACG

In that case, it would see that you are limited to 50% because of the scot prov policy.

Its not something i have come across or looked into in too much depth before as it seems pointless having income protection policies.

shackalak

Older IPP policies would allow you to cover up to 75% of your gross income (LESS and allowance for state benefits) but this then became taxable after you had received the benefit for 12 months. More recent IPP plans generally cover somewhere between 50% and 65% of your last years gross salary (PLUS state benefits) but they are no longer taxable.

The overall idea is that there must be some incentive for you to return to work. Otherwise, insurers would be inundated with claims. You can not be financially advantaged by being off sick.

I would say that in your case, the two insurers would negotiate the amount that is paid between them, subject to the overall limits.

Always make sure you take account of any benefits provided by your employer, any Mortgage Payment Protection Plans, Payment Waiver on insurance polices and payment protection on any loans as these amount will be taken into consideration in the event of a claim. If you haven't take account of these, you could have the wrong waiting period or level of cover (some plans allow you to have different levels of cover after different waiting periods to take account of these).

If you have incorrect cover you could be paying more than you really need to on your insurance. Most plans will allow you to alter the level of benefit and change the waiting period if you need to without cancelling the cover (although new underwriting may be required if there is any additional risk to the provider).

shr_2

Thanks Shackalak.
It sounds as though you know what you're talking about... !

The 75% limit policy is one that I've had since the mid 1990s - so I'm guessing anything paid out on this would probably be taxable (which I didn't realise) ?

When you refer to the overall limits - will they both end up sticking to the Scot Prov 50% limit, or each operate within different limits ?

I guess I probably am over-insured, but I ended up getting the Scot Prov policy as part of a wider policy which also covers Critical Illness, as advised by a financial advisor after a review of all my policies. To be quite honest, I didn't particularly understand it at the time, and have only just got to grips with the different aspects of the policy as I have put in a claim recently. I probably should have reviewed the first policy, and increased the amount it was based on over the years. Its easier to see that with hind-sight, and now that I better understand what these policies are all about...