“Sure, it’s possible to increase cover via guaranteed insurability options over time but what if the client suffers from some permanent incapacity right after taking out cover? They’d be stuck with the same level of cover for the entirety of their claim.”
6. Benefit guarantees.
If your client’s income is likely to fluctuate - if they rely on commission, bonuses or are self-employed - a benefit guarantee is a valuable option when looking at income protection.
There is a risk that if a claim was made that their income could have dropped below the level originally insured for.
A benefit guarantee gives people certainty that as long as the claimant is working for a minimum number of hours prior to claim, typically between £1,000 and £1,500 per month benefit is guaranteed to be paid, or the full sum assured if less.
Drewberry Insurance’s Tom Conner said: “Benefit guarantees can be extremely important for anyone with a realistic risk of income fluctuation, such as for sales professionals or the self-employed.
“With sole-traders there can also be a discrepancy between what these clients say they earn and what is actually reported in future accounts, so benefit guarantees also help to limit that risk for the client.”
7. Occupation classes.
The occupation class attached to an income protection policy has one of the biggest effects on whether a claim will be paid. Having ‘own occupation’ cover means that your client can claim if they are unable to do their own job.
Other levels of cover exist, whereby people have to be unable to do a suited job, any job, or unable to perform unaided a number of tasks from a list (called activities of daily living or daily work) such as walking or using a telephone.
The latter occupation definitions are clearly much harder to claim on, so it’s essential to understand under which capacity cover is being offered. Many providers have moved towards solely offering own occupation cover, particularly friendly societies.
Mark Myers, chief executive of British Friendly, said: “We believe in giving the best cover possible to our members, not discriminating because of their personal circumstances.
“When a firm is set up to welcome all types of clients they’re more likely to be better prepared to pay claims.”
8. Income instead of lump sum.
The majority of life cover is taken out under a lump sum basis, but in some cases an income would be more appropriate, particularly for protecting the day-to-day costs associated with raising a family.
Family income benefit is an undersold product that pays a tax-free income on death, and is often cheaper than level-term lump sum cover. This is because the benefit received depends on when a claim is made.
