If you are confused about whether to choose sickness cover or traditional income protection for disability, relax because most professionals face this dilemma. So where do you go to get help in making this choice?
Firstly, you need to be dealing with a financial specialist and this is someone who is a reputable financial intermediary and who is in a position to render the specialised advice required for a professional. However, many professionals have enquiring minds and prefer to do a bit of research themselves before they discuss these challenges with a financial specialist.
What are the basics that you should know about sickness cover and income protection?
Sickness benefit is a very simple concept, as it pays out if you are placed on sick leave as a result of an illness or injury which renders you unable to perform your usual professional duties. It has a 7 day waiting period, so claims of less than 7 days are not considered. However, once your sick leave has lasted more then 7 days, the payment backdates to day one. For example, if you were booked off for 10 days, it would pay out for the full ten days, and it includes weekends and public holidays. The majority of sickness benefit claims are for shorter term, high frequency occurrences, like sinusitis or bronchitis, and statistics show that the average sickness benefit claim is for between 10 - 14 days. There is no requirement to prove any loss of income, the doctor's certificate (in the form of a one page document from the assurer) is what validates the claim, and the benefit is paid tax free. A maximum of 24 monthly payments will be made for a specific cause.
An Income Protector on the other hand, has a lot more flexibility in the waiting periods that can be selected, and you can select 7 days, 1, 3, 6, 12 or 24 months as a waiting period which enables your financial adviser to structure the product to your individual needs. Your disability to work must also result in a loss of income, in order for you to qualify for a claim. An income protector can also protect you against the possibility of permanent disability, in that the benefit payments may continue until your chosen retirement age. One of the major benefits of an Income Protector is the ability to deduct your monthly premiums from your taxable income. Many professionals find the tax deductibility to be of great value if you weigh up the certainty of a regular premium payment which is tax deductible, as opposed to the possibility of a claim payout, which would be taxable.
The reason why many assurers regard professionals as top quality clients is that experience shows that professionals lead healthier lifestyles, keep themselves in shape, and look after their health and therefore they should not be heavy claimers. However, misfortune can befall anyone, including professionals and if you factor in the outside challenges in our lives over which we have no control, this cover could be essential for the continued success of your practice!
In summary, Sickness Benefit premiums are not tax deductible, but the payout of a benefit is tax free. An Income Protector premium is tax deductible, but the payout of a benefit is taxable in your hands. A Sickness Benefit requires no loss of income while an Income Protector does require loss of income, to qualify for a claim.
Cobalt Solutions for Professionals offers both of these solutions which can be taken in a combination, and this means you can experience the best of both worlds! Please feel free to contact us on 0860 118 888 for a no obligation discussion with a professional financial adviser or contact us here.
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