Permanent health cover is commonly known as income protection insurance and pays out a tax-free monthly income directly to you if you are unable to work due to sickness or injury. The amount of cover available with a permanent health insurance policy is usually set between 50% and 65% of your pre-tax earnings.
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What can permanent health insurance be used for?
The permanent health cover payout can be used to replace lost income, pay healthcare costs, bills such as food and necessities, and your monthly financial obligations such as the mortgage or rent, credit card and loan payments.
Essentially, the monthly payout from your permanent health insurance policy can be spent however you wish. Permanent health cover can be taken out whether you are employed or self-employed and is a long term protection policy, covering you up to retirement if so wished.
When will the permanent health cover payout?
Permanent health insurance will payout due to incapacity and thus an inability to work caused by illness or injury. A Permanent health insurance policy can have three main definitions of incapacity:
- Own occupation
- Suited occupation
- Any occupation
If you become incapacitated your permanent health cover will start to payout after a deferred period which you choose at the start of the permanent health insurance. It is common to align the deferred period with the length of time your employer will provide adequate sick pay.
How much will the permanent health insurance payout?
The amount of the permanent health insurance payout received will depend on the amount of cover you choose on applying for permanent health insurance, you are able to choose to cover up to 65% of your gross earnings. Any state benefits payable or benefits in receipt from other policies may reduce the payout of your permanent health insurance.
Do I need permanent health cover?
What would be the financial impact on you and your family if you were to become seriously ill and unable to work? Would your partner have enough earnings and savings to pay the bills and make mortgage loan payments? If not, then a permanent health insurance policy could be a solid way to protect their future.
Factors to consider when buying an permanent health insurance?
- What tax-free monthly income would you and your family require should you be off work due to serious illness or injury?
- How quickly would you require the policy to start paying a monthly benefit following a serious illness or injury which renders you unable to work?
- For how long would you need the permanent health cover to payout, until planned retirement?
- Would you like the policy premiums to be fixed over the term of the insurance?
- Do you want your permanent health insurance to cover you if you were unable to perform the duties of your own occupation due to sickness or injury?
Please note that permanent health cover is to protect you from long term sickness or injury. If you are looking to protect a loan or mortgage from short term accident, sickness or unemployment you should consider accident, sickness and unemployment cover or mortgage protection insurance.
For more general insurance information please navigate to the Association of British Insurers website.
