Group Income Protection Vs Individual IP

Culainn

I am a member of my Employers Group Income Protection Scheme which will pay me 60% of my Basic Salary only if I am unable to work in my job for longer than 6 months. However, my basic salary is 1/3 of my actual earnings as I get a guaranteed bonus.

Therefore I want to take out a top up Individual IP policy to protect my bonus and I have found a company who will do this.

My issue is in regards to the Group Scheme is that they will take any continuing income I receive as a result of my illness into account at claims stage which means they will take any benefit I receive from my top up IP policy off the group scheme payment.

This seems very unfair as although they will only protect my basic salary, if I make provisions to protect my bonus they will deduct that from my payment.

Is this the norm - any advice very welcome as I know alot of my colleagues and friends have top up IP Plans which now seem to be a waste of money

kingstreet

It's worth bearing in mind, benefits from an individual PHI plan are free of income tax and national insurance.

IIRC payments from an employer's scheme are paid to the employer and then paid on to you via PAYE.

On top of that, you have the issue of the aggregation of benefits you mention and it's a good question if it's worth being in the group scheme.

It may be worth a discussion with an IFA to compare the two in more detail.

Rymo_2

Be careful with your employers cover.

I have 75% cover less ESA and WRAC (after 6 months off) through my employer (through Friends Life), I pay £8.89 per month to increase this from the standard 50%.

I thought this was a fantastic deal.

When reading the documentation;

If your claim is accepted, you will receive the benefit applicable to your chosen level of insurance, each month through payroll. Regular income payments will continue while you continue as an employee until you recover and return to work, until you reach normal retirement age, die or leave service, whichever is earlier.

Something niggled at me about the "while you continue as an employee" and "or leave service" bits so I phoned the helpline and they confirmed my fears.

If I was unable to work permanently, after a period my employment would end and also the IP payments.

So this is in effect a Short Term Policy. I wonder how many others think they are covered till retirement when in fact they are not!