Income protection reduced benefit

Newbie321

Hi all,

I'm starting to look around for income protection and had a question about the maximum benefit payouts.

I already have a policy (A) as part of my employment package, but it only pays out for 2 years.

So I want to purchase an extra policy (B) for the long term, but I can't find any policies that have a deferment period over 12 months.

So there would be an overlap.
If I ever had to claim, after 12 months I would still be receiving my policy A's benefits, which would take me over the maximum benefit for policy B. So the payout from B would be reduced.

Am I safe in thinking that after policy A stops paying out, policy B would re-evaluate my other income and then increase their pay out? Or do different providers do things differently?

I'm new to this... any help much appreciated

Aretnap

I have a recently purchased income protection policy with Aviva with a deferral period of two years - my wife has one with FriendsLife with the same deferral period. So it shouldn't be too difficult to find one. Are you tiring to buy directly, or are you going via a broker/IFA? You'll likely get more choice if you use the latter route - I believe it's a produce which a lot of providers don't sell online direct to the customer.

muhandis

Agree with the poster above. not sure where you got the 12 month limit from. Maybe you looked at IP policies with a low term limit (2, 3 years, etc)?

My husband's IP has a deferred period of 18 months. You would do well to speak to a broker/IFA to get an idea of the options you have. Should be easy to find one that doesn't charge to give you recommendations.

Good luck.

Newbie321 wrote: »

Hi all,

I'm starting to look around for income protection and had a question about the maximum benefit payouts.

I already have a policy (A) as part of my employment package, but it only pays out for 2 years.

So I want to purchase an extra policy (B) for the long term, but I can't find any policies that have a deferment period over 12 months.

So there would be an overlap.
If I ever had to claim, after 12 months I would still be receiving my policy A's benefits, which would take me over the maximum benefit for policy B. So the payout from B would be reduced.

Am I safe in thinking that after policy A stops paying out, policy B would re-evaluate my other income and then increase their pay out? Or do different providers do things differently?

I'm new to this... any help much appreciated

Newbie321

Thanks for the replies.
I had spoken with an IFA recently about it. The problem is that a lot of insurers will not accept me because of my occupation, and the ones that do accept me have a low age limit, again due to occupation. Aviva will not accept me at all. Friends Life was an option but now no longer accept new business after being taken over by Aviva. There were only a couple of options given by the IFA and they were far too expensive, so I started to look myself.
I think I have found a decent deal that I want to go ahead with, however there is this overlapping period with my existing cover. Does anyone know if insurers periodically review the benefit payout? I don't mind accepting the fact that I will not receive full benefit for that 12 month overlap.
Thanks again

muhandis

AFAIK, payout will be assessed at the point of a claim, and as you said reduced by the difference between the payout mentioned in the policy and what your employer pays you.

Out of interest, which provider are you looking at? I struggled to find any of the big players that sold IP policies directly to clients.

Newbie321 wrote: »

Thanks for the replies.
I had spoken with an IFA recently about it. The problem is that a lot of insurers will not accept me because of my occupation, and the ones that do accept me have a low age limit, again due to occupation. Aviva will not accept me at all. Friends Life was an option but now no longer accept new business after being taken over by Aviva. There were only a couple of options given by the IFA and they were far too expensive, so I started to look myself.
I think I have found a decent deal that I want to go ahead with, however there is this overlapping period with my existing cover. Does anyone know if insurers periodically review the benefit payout? I don't mind accepting the fact that I will not receive full benefit for that 12 month overlap.
Thanks again

dunstonh

The problem is that a lot of insurers will not accept me because of my occupation, and the ones that do accept me have a low age limit, again due to occupation.

This is where the friendly societies tend to come into play. They tend to focus on niche, unusual or high risk occupations/hobbies.

I think I have found a decent deal that I want to go ahead with, however there is this overlapping period with my existing cover. Does anyone know if insurers periodically review the benefit payout? I don't mind accepting the fact that I will not receive full benefit for that 12 month overlap.
Thanks again

How much is the overlap? Sometimes there is a small overlap but usually employers go by weeks that are similar to the weeks you get with PHI. 4, 13, 26 and 52 being common.

Newbie321

Thanks yes, I am torn between a couple of friendly societies.

Employers benefit pays out for 2 years, and that starts after 6 months sick pay.
So employer's benefit stops paying out after 2.5 years since first day of sickness.

But the friendlies I am looking at have a deferment of 1 year.

So the total overlap is 18 months.

Hope that makes sense

Weighty1

The IP plan would probably not pay out at all whilst you were still receiving your employers benefits, depending on how much you receive from work, however, once the work related benefits stop you would then simply need to ask the insurer to re-assess your income and then they should provide the original sum assured you applied for.

Very few providers actually offer a 2-year deferment period, and in your instance you would actually need 30-months. Based on past experience, 2-yr deferment periods can also cost more than 1-year ones because few insurers offer them thereby limiting choice and if a plan only starts paying out after 2-years then there's a good chance that it will be paying out for the very long term.