Isn’t it what all that mis-selling was about some years back?
No it’s not. That was Payment Protection Insurance, better known as PPI. Even now, Income Protection is sometimes incorrectly linked to PPI. As mentioned above, Income Protection is sometimes called PHI, which, let’s face it, is a pretty close acronym. There are also other similarities, which led to Income Protection raising suspicions among some businesses and individuals.
Basically, PPI covered the cost of loan payments or minimum credit card payments if someone was too ill to work, typically for a year or two at most.
Income Protection can provide a regular replacement income if someone is unable to work due to illness or injury, until they either return to work, reach the end of the policy’s agreed timescale for paying benefit, retire, or die - depending on the policy chosen.
Does it cover redundancy?
No, but it’s a popular misconception.
Both Group and Individual Income Protection only pay out when a person’s illness or injury prevents them from working.
With GIP, there are some policies where an employer can choose to ensure their employee continues to receive payments from an ongoing long-term claim, even if they have to terminate their employment contract and replace them. This may be called Pay Direct or something similar, and allows both parties to move on.
An Individual Income Protection policy may also continue to pay out if someone lost their job while ill or injured, and they were receiving benefits from an ongoing claim (though this may depend on the policy they’ve selected or may be looked at on a case-by-case basis).
However, a person cannot make an Income Protection claim because they are made redundant.
While the financial benefits are usually the main reason why people choose to protect their income, GIP and Income Protection for individuals frequently come with a wide range of added value support. And it’s not just for employees. Employers too can also get access to expert advice and support tools. Even better, this type of support - for both employer and employee - usually comes as part and parcel of the policy and doesn’t cost a penny extra.
So what are some of the typical built-in benefits?
Employee and Employer Assistance Programme
Commonly called an EAP, with GIP policies it offers expert advice, information and practical support on a range of work and life issues. These may include health and wellbeing, money matters, bereavement, relationships, family and basic legal advice for domestic problems. It may also offer face-to-face or telephone counselling and even cognitive behavioural therapy to help people combat stress.
The employer can often access services such as advice for managers and more in-depth legal advice, especially around employment law, taxes and disability legislation.
While not universally available, some Individual Income Protection policies will provide access to an EAP similar to the programme GIP employees have. It may not necessarily be as comprehensive, but will usually offer at least an entry level of support tools and advice.
Vocational Rehabilitation
Vocational rehabilitation complements GIP perfectly. While the benefit ensures the ill or injured employee has financial security and peace of mind, expert Vocational Rehabilitation Consultants (VRC) can help the employee make a safe, and importantly, sustainable return to work when ready.
Companies that provide GIP may have their own in-house medical and vocational expertise, or might partner with an external company. Typically, VRCs have qualifications across a wide range of specialities, such as Occupational Therapy, Occupational Psychology, Physiotherapy and Nursing.
Some of the things a VRC may do are:
- Suggesting practical ideas to aid recovery
- Acting as an independent intermediary between the employee and employer
- Highlighting potential barriers that may prevent the employee returning
- Suggesting possible adjustments to the employee’s workstation or workplace
- Creating a graduated return to work plan
Some GIP policies also allow early intervention, allowing employers to flag up situations where they believe an employee who is still at work may be struggling with a health problem.
Calling on expert VRC support early can help to prevent workplace absence by tackling short-term issues before they become long-term health problems, affecting performance and productivity.
Some personal Income Protection policies may also offer an incapacitated employee help to return to work where they believe the individual’s circumstances suggest it would be beneficial.
Sickness absence monitoring
Failing to monitor sickness absence can leave employers in the dark about causes of absence, possible trends, and the true cost of illness and injury to the business.
Meanwhile, according to the Chartered Institute of Personnel and Development’s (CIPD) health and wellbeing report 2020, ‘presenteeism’ (where people come in to work while ill) is an issue for British businesses. ‘Leaveism’, where people take allocated time off, like holiday when they’re actually ill is another problem3.
The expertise that typically comes with Group Income Protection allows companies to keep a check on the causes of absence, flagging any trends so they can be nipped in the bud. Businesses also no longer have to rely on, or try to interpret, a GP’s fit note. Instead, absence is assessed, monitored and tracked independently, providing a realistic account of how long absence may be expected to last, while identifying people persistently having time off.
Add-ons
Both Group Income Protection and Individual Income Protection policies may offer a number of additional benefits, either included in the policy or as an add-on that costs extra.
Some examples may include:
- Payments for a hospital stay
- An option to increase the benefit in line with inflation during a claim
- Percentage increase in benefit after an agreed length of sickness absence
How do you get Income Protection insurance?
Group Income Protection
Group Income Protection is bought by employers and offered as an employee benefit.
While there are some standard policies on the market, GIP allows employers to choose a policy that fits their business needs and budget. Businesses can pick and choose how long a policy runs for, whether it’ll be fully-funded by the company or part-funded with the employee, what percentage of salary it pays out, which employees get it and how long they have to be off work before the benefit kicks in. These will all impact on how much the premium costs the company.
Note that some insurance providers don’t sell direct to the employer, but go through an insurance broker or adviser.
Individual Income Protection
People can get Income Protection individually through a broker or IFA, and, in some cases, directly from an insurance provider. However, not all insurance providers sell Individual Income Protection, and people wanting to take out an individual policy should ideally speak to an IFA. The IFA will be able to suggest policies that suit the person’s particular circumstances, and possible providers.
For a list of IFAs, visit the Unbiased website.