Insurers are under pressure to ‘treat their customers fairly’ so it is good to see Norwich Union doing just that with its revamped income protection plan which provides flexibility and strong after care service.

Income protection is an insurance which pays out if you are too ill to work for a long period. If you are so ill that you can’t ever work again, it will pay out until retirement.

You can choose the level of earnings you want to be paid while off sick. There is a selection of eight deferment periods  of between 4 and 112 weeks (the time before payments kick in) so that you can dovetail the policy with any existing cover you may have through workplace benefits or existing savings. 

The plan is also flexible in that you can choose for it to pay out until any retirement age between 50 and 70, which is good news if you intend to continue working in retirement.

Guaranteed (fixed) or reviewable premiums are available, as is indexation of benefits in line with RPI. There are also no standard exclusions.

The maximum payout is 60 per cent of the first 25,000 of annual earnings and 50 per cent of the remainder up to £180,000 -  one of the highest benefit levels in the market.

Another attractive feature is the rehabilitation service, which gives you access to trained medical staff to help you get back to work.

On the downside, if you want to extend existing cover, you may have to set up a new policy to reflect your current state of health, which could mean an increase in premiums.

Defaqto life and protection principal, Ben Heffer, says: “Where NU has something new to add is in the area of claims management, in that claims are dealt with over the phone by a dedicated team of claims advisers. Policyholders have access to an online and telephone-based health management tool, including 24 hour GP helpline and Stress Helpline.”

Income protection is a complex product and independent financial advice is strongly recommended.
To find an IFA in your area visit:
www.unbiased.co.uk

For more income protection, read the Defaqto guide:
http://www.defaqto.com/consumer/insurance/life/income-protection.aspx
 

It’s nice to see an insurance company launch a customer friendly product for a change. I’m  referring to Fortis’s Real Life protection plan, launched in conjunction with the broker, Life Search.

In  brief, Real Life incorporates seven protections - including term assurance, critical illness and income protection - all within one plan, obviating the need for the broker to sell three separate policies.

The plan works by having two pots - one for term assurance claims and one for critical illness and income  protection claims. Although not ideal, the plan has the advantage of providing broad, albeit limited, protection against death and loss of income.

Most people have some form of life cover, via with profit endowments, term assurance, whole of life policies or through workplace benefits. Far fewer people have protection against being unable to work because of long term illness.

While life cover only benefits your dependants if you die, critical illness and income protection pay the bills if you survive.

Critical illness pays you a lump sum if you survive 30 days from diagnosis of a serious illness, such as heart attack, stroke or cancer, while income protection pays you a monthly income if you are unable to work because of long term sickness.

In the case of Real Life, it works like this. Say, you buy £250,000 of life cover, there are two pots to draw on - a  £250,000 pot for term assurance, and a £250,000 pot for critical illness and income protection.

If you are diagnosed with critical illness, you can claim 12 per cent of amount in your pot, which in this case would be £30,000. You can make up to three critical illness claims, providing they are for different illnesses and there is still money in the pot.

If you make an income protection claim, it will pay out 1 per cent of the pot each month, or £2,500 in this example, until the pot runs out after eight years and four months (£2,500×100 months).

Although the income protection cover is clearly limited, the policy is a step in the right direction in that it will help close the protection gap that currently exists and the premiums are fixed for life.

As an example, a 25 year old woman office worker in normal health would pay £18.02 a month for  £100,000 of life cover up to age 60. Unless she increases the level of cover, the premium is guaranteed not to rise.

The plan is currently only sold via Life Search and Asda, but there are plans to roll it out to other brokers soon.

Matt Morris of Life Search says: “The whole point of Real Life cover is the protection it provides against all the eventualities of life. Nowadays, you are far more likely to suffer a serious illness or long term incapacity before age 65, than to die.”

For more information visit:

www.reallifecover.co.uk
www.lifesearch.co.uk
http://www.asdafinance.com/life-insurance-real-life-cover.html