Health insurance Advice

Health Insurance Advice

Protection against the consequences of illness now takes a variety of forms.

This is an area that has seen considerable development in recent years, both in response to progress in medical treatment and customers’ changing requirements.

Income Protection

An income protection policy will provide you with an income (usually tax free) if you are unable to work as a result of illness or disability. The payments begin after a specified period once you have stopped work, which is often three months, but can be longer or shorter. The sooner payments start, the higher the premium. Some income protection plans will pay out for a maximum fixed number of years while you remain ill. Under other plans payment can run on until your retirement, if you fail to recover. Income protection is also available for house-persons, although maximum cover levels are relatively modest.

Accident and Sickness Policies

These policies are similar to income protection policies, but generally offer less comprehensive protection. They can also include unemployment cover, in which case they are sometimes sold as mortgage payment protection insurance (MPPI) or, for non-mortgage loans, payment protection insurance (PPI). Typically payments under a policy will start one month after the claim is made, but will end after 12 or 24 months. Payment protection policies are often heavily promoted by lenders, but usually there is no requirement to arrange one alongside the borrowing.

Critical Illness Cover

A critical illness policy will pay out a lump sum if you are diagnosed as suffering from one of a list of medical conditions. All critical illness policies cover most cancers, heart attack and stroke – the three most common causes of claim (in that order). Beyond that trio cover varies widely and can include an extensive range of illnesses, such as benign brain tumour, multiple sclerosis and Parkinson’s disease. Critical illness is complementary to income protection rather than a substitute: the coverage of income protection is generally much broader.

Private Medical Insurance

Private medical insurance policies are designed to meet medical expenses. This was an area dominated by a handful of provident societies, but it has now become more competitive, with some major insurance companies also in the market. For many years, medical advances have pushed up the cost of private medical insurance, a situation that has prompted innovative forms of cover. For example, some policies at the lower end of the cost scale will pay only for in-patient treatment, which means you have to meet consultant’s fees and outpatient treatments from your own resources. At the expensive end, some comprehensive policies can include home nursing costs and dental fees.

Immediate Care Plans

Immediate care plans address the difficult issue of funding long term care. In exchange for a single premium – often representing part of the proceeds of a house sale – the plan will make specified payments until the policyholder’s death. Under current tax rules, there is no income tax liability if the payments are made direct to the policyholder’s care home. This type of plan helps to remove the risk that ‘the money will run out’, forcing a vulnerable person to accept a lower (state-funded) standard of care.

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