Health insurance can be a minefield of technical terms, difficult to navigate. As independent financial advisers, we offer various types of health cover including permanent health insurance, income protection, critical illness cover and private medical insurance.
Income protection is designed to replace your monthly salary, subject to a maximum monthly amount of benefit (sometimes known as cover), if you were unable to work due to illness or an injury, until you return to work, reach your nominated retirement age or die. The maximum monthly amount of cover is set by the individual provider, but you are not allowed to earn more whilst you are off work due to illness or injury. The maximum amount of cover is the payment made after a deferred period which could be 1, 3, 6, 12 or 24 months. Normally, the longer the deferred period, the lower the premiums. There is also the facility to have two deferred periods, so if your employer pays you a full salary for 3 months and 50% pay for the next 3 months and then nothing thereafter, you could have half your monthly benefit after 3 months and then your maximum benefit after 6 months.
Critical illness: With advances in medical science, people are now recovering from illnesses which in the past they would not have recovered from. Critical illness protection is designed to help you through that period of recovery and provide funds to enable you to either fully recover before returning to work or make adaptions to your home, for example by installing ramps and hoists, widening doorways or installing a wet room.
Private medical insurance: this is an insurance policy issued by companies and not the government. They are designed to allow the policy holder to access private medical treatment, subject to terms and conditions of the policy. This type of policy can be used in conjunction with NHS treatment or as an alternative outside of the NHS.
How much will I pay?
The amount you pay (the premium) will depend on the level of benefit you have requested and if that benefit is to increase in time. However, once your application is accepted, unless you request to change something, the amount you pay for a level benefit will not change. If you choose an increasing income protection benefit policy your premiums will increase.
I have income from other sources, will this affect the amount of benefit I can have?
Yes, any income you receive will be considered. If you have income from another employer or self-employment, dividend income from a private business which represents your share of their trading profits, another income protection policy or income from a pension which relate to ill health retirement of incapacity payments, then these can affect your policy.
Why do I need critical illness protection?
The sum assured could be used to help pay off a mortgage, or provide a lump sum to make alterations to the property or just to ease the financial worries of your family.
Can anyone take out a critical illness policy?
You can only apply for a critical illness policy if you are permanently living in the UK, and aged between 18 and 65 or 18 and 60 if you choose inflation-linked cover.
Is there a limit on how much critical illness can I have?
There is no minimum or maximum amount you can insure yourself for, but most providers will have a minimum premium they will charge. If you are unsure on the amount you need, then your financial adviser will be able to discuss your needs and advise you on a suitable sum assured.
Will I still have to pay my premium if I am ill?
When you apply for your critical illness policy, there is an option to apply for a ‘waiver of premium’ policy at the same time. If you choose this option you will be able to insure your premiums. Then if you are unable to work because of sickness or accident this would normally mean that your premiums for this policy would continue to be paid on your behalf if you suffered an accident or sickness which left you unable to work for longer than the waiting period.
Will I pay tax on the sum assured?
If you do have to make a claim on your policy and you receive the sum assured, this is usually paid without the deduction of income tax and capital gains tax — however, depending on how you set up the policy, inheritance tax (IHT) could come into play when the sum assured is paid into your estate. IHT could be due if the total value of your estate is worth more than the allowances available.
Will this cover my existing ailments?
You will not be covered for any pre-existing conditions, these are usually excluded from your cover along with any conditions related to it. The provider will show any exclusions on the membership certificate you receive from us when we have processed your application. The same process will also apply for any members of your family included in your application.
What is the difference between moratorium and full medical underwriting?
With moratorium underwriting, you don’t need to let the insured know of your (or your family’s) medical history. If you were to make a claim within the first two years of taking out your plan, then any medical condition you or your family may have had in the five years prior to joining the scheme, would be excluded.
Full underwriting gives certainty about the extent of your cover at the point of joining. Therefore, any new medical conditions arising after the start of your policy will be covered, (subject to the policy terms and conditions). A fully underwritten policy does not cover medical conditions that you (and your family) already have, (including any related conditions), when you take out the policy.
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