Before we start, let’s take a look at what types of “health insurance” we can provide. As independent Financial Advisers LR Financial Services offer three types of cover: Permanent Health Insurance, sometimes known as Income Protection, Critical illness cover, Private Medical Insurance.
Income Protection Will pay a monthly amount if the life assured is unable to work due to illness or an injury, until they can either return to work, reach their nominated retirement age or pass away.
Critical Illness This type of policy will pay the sum assured on diagnosis of a listed serious illness.
Private Medical Insurance: Allows the policy holder to access private medical examinations, consultations and or treatment, by either paying some or all of that cost.
More in-depth look at health insurance
With all the different information available, health insurance can be tricky to navigate.
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 that said you are not allowed to earn more while you are off work due to illness or injury than you would whilst working. The maximum amount of cover is the payment is normally made after a deferred period which could be 1, 3, 6, 12 months or 2 years. 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 halve 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 alterations to your home, for example by installing ramps and hoists, widening doorways or changing the bathroom to a wet room.
Private Medical Insurance: 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 the National Health Service (NHS) treatment or instead 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 remain level or increasing. 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.
At what age could I apply for Income Protection?
The earliest you can apply is once you attain the age of 18. The minimum term of the policy is normally for a 5-year period, so the latest you can apply is 65 but this may vary between providers.
I have income from other sources, will this affect the amount of benefit I can have?
Yes, any income you receive will be considered. Therefore, 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.
When will my income payments start?
All Income Protection policies have deferred periods. A deferred period is a period of time when you’re unable to work but you don’t receive monthly benefit. The longer the deferred period is, the cheaper your premium will be. When you apply for your policy you will need to choose between four different deferred periods (4, 13, 26 or 52 weeks). When thinking of the deferred period, you should consider any income you will continue to receive once you stop working. Also think about how much you have in savings and if you are prepared to use those saving to supplement your income. Once you have decided on your deferred period your benefit will start one month after your deferred period ends and then will be paid monthly in arrears. Premiums must continue to be paid during your deferred period and whilst your claim is being processed, you will be notified, by your provider, when you no longer need to pay your premiums who will suspend them while they your monthly benefit. Any overpaid premiums will normally be returned to you, when your claim ends.
My employer pays me 3 months full pay and then 3 months half pay, if I’m off sick!
Because you receive different payments from your employer, you could choose the Stepped Benefit option. This will allow you to select two deferred periods, each with different monthly benefits. This means you start with a lower monthly benefit which then increases as your continuing income reduces. The Stepped Benefit allows you the flexibility to tailor your policy to meet your personal circumstances.
What is Critical Illness protection?
This type insurance policy is designed to pay a one-off cash lump sum, also known as the sum assured, on the diagnosis of one of the critical illnesses listed within the term and conditions of the 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 ease the financial worries of your family.
Can anyone take out a critical illness policy?
No, you can apply for a critical illness policy if you are:
Permanently living in the UK, and
Aged between 17 and 64 or between 17 and 59 if you choose inflation-linked cover.
Is there a limit on how much critical illness can I have?
There is no minimum amount of 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 become liable. This could be possible as the sum assured could be paid into your estate and 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?
You do not need to let your insurer know your (or your family’s) medical history with moratorium underwriting. If you were to make a claim within the first two years of taking out your plan, the any medical condition you (or your family) may have had in the five years prior to joining the scheme, would not be covered.
With full underwriting you would have 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