Bill protection insurance
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Learn how to save money on income protection insurance with our special guide...
What is bill protection insurance?
Bills may be the bane of our lives but, like taxes, there’s no avoiding or hiding from them. Which is all fine and dandy whilst you have money coming in (courtesy of a regular wage packet) to address these regular demands on your income stream, however things can get more than a little iffy – and quickly descend into nightmarish situations – the moment bill-payers cease to have any means of income.
Landline phone bills, mobile phone bills, broadband bills, conventional utility bills (gas, electricity, water), motoring bills, satellite/cable TV bills, credit card bills, store card bills….bills confront us at every turn; and have a nasty habit of falling onto our doormats every month.
But what if you suddenly get struck down with a serious illness or lose your job out of the blue through redundancy? Or suffer an injury at work which nobody saw coming, least of all you? What then? If you’re very lucky your current employer may offer you sick pay for a while, or you may be able to draw on some savings for an indefinite period, or perhaps your partner or family might be in a financial position to support you for a limited time until you get back on your feet.
But ‘what’s’ and ‘if’s’ are notoriously fickle things to rely on and don’t always come home to roost, so instead it’s always prudent to make contingency plans. To think and be one step ahead.
Bill protection insurance is ostensibly another name for income protection insurance, quite literally in a word (or three). More universally acknowledged in America and Australia, bill protection insurance in this instance refers to a cost-effective insurance model which alleviates the added stress of finding the means to pay bills, thus leaving the policyholder to concentrate on convalescing in the direct aftermath of ill health or injury or securing new employment.
At a glance, bill protection insurance policies are paid out in the unfortunate event of accident, sickness and/or unemployment and offer a great sense of security to the policyholder and their dependents.
Also known as permanent health insurance and long-term disability insurance in other previous guises, bill protection insurance is a specific long-term insurance product which comes into effect at the juncture of the policyholder being rendered unable to work due to either serious health or injury implications or redundancy (of a non-voluntary nature).
For the passage of time whereby the policyholder is physically unable to hold down employment due to illness, injury or redundancy not of their own making, bill protection insurance will replace a percentage of their income, and will continue to pay-out until such time as they are in a position to recommence work, retire or the end of the pre-agreed policy cycle is recognised.
There’s normally a waiting period to be aware of prior to the payments to the policyholder starting (in the event of the policy being actioned), which for most people would be coincided as closely as possible with the time when any company sick pay you might receive is scheduled to expire. Or any other insurance the policyholder may have in place. This augers well for the bill protection insurance policyholder as the greater the intervening period between filing the claim and receiving the first payment, the lower the premiums are in the first place.
Do I need bill protection insurance?
Although you’re not legally or contractually obliged in any way to have bill protection insurance it’s one of many dedicated insurance products which is a very good idea to have; so as you’re covered for the type of eventualities which could easily happen to any one of us at any point in our working lives.
Chiefly these are the likelihood of serious illness, injury or redundancy; the latter example being particularly resonant in these days of job insecurity. Having said that, pretty much two-thirds of a conventional bill protection insurance policy is centred around the prospect of illness or injury befalling us, and is designed and scheduled around this potential occurrence affecting a policyholder.
There are three main levels of cover which help to define the incapacity which could be responsible in their own rights for stop you from working in the future. These are: ‘own occupation’, ‘suited occupation’ and ‘any occupation’.
Whilst the first two are more geared up for those policyholder who would find it impossible to maintain employment in their familiar vocational surrounds, with ‘any occupation’ cover you can claim if you can’t carry out ANY role (irrespective of nature and prior experience/qualifications), per se, as you’re fitting the insurance policy profile of being deemed too ill/injured to do any kind of job.
It’s worth pointing out that with any of these covers, the bill protection policy will only recompense the policyholder to a certain, pre-determined fiscal limit.
Own occupation is widely regarded as the highest level of this type of cover and seeks to provide an income for the policyholder should they be struck down with a career-compromising illness or injury which restricts your ability to complete the tasks which form the mainstay of your role.
To clarify, if your existing role pre-meditated the repetitive lifting of heavy objects which you could now no longer do, the own occupation policy would pay-out, despite the fact that you are potentially well enough to hold down an alternative means of work. Bear in mind though, if your job is classed as too risky by the bill protection insurance provider (working at great heights, below ground, etc…), the chances are you’d fail to get this type of cover from the outset and it would instead be suggested that ‘any occupation’ cover would better suit your needs.
The second rung down the bill protection insurance cover ladder is where you’ll normally find ‘suited occupation’; and only pays-out to the policyholder if you can’t carry out the duties/a job which you’re deemed as being suited for. This will be pre-determined by your insurance provider and based largely around skills, training, qualifications and experience.
The entry-level bill protection insurance cover is an ‘any occupation’ plan and represents the lowest level of coverage. Generally it’s advised against if only because it offers significantly less earnings protection than the aforementioned two options. In essence this plan will ONLY pay out if the policyholder is incapable of doing ANY job. As a reference point, say you were an inspector for a company and your remit was to be on the road all the time calling on companies and a medical condition cropped up which severely hampered your mobility. As far as the insurer was concerned, although this compromised your normal job’s main duties, it didn’t necessarily rule out you being office-based as an alternative.
How much does bill protection insurance cost?
As a barometer it’s worth knowing from the off that bill protection insurance is more often than not more expensive than a life insurance policy; unsurprising when you think about it as law of averages dictate that you’ll be more likely to put in a claim for the former in the short-to-medium term as opposed to the latter.
What’s more, and another main difference and monetary factor which influences policy pricing, is the fact that with bill protection policies you can claim more than once, which you clearly can’t with life insurance plans.
Once you’ve understood these differentials and acknowledged that you’ll generally be stumping up a little more for your bill protection insurance policy, then we can take a look at just what else might affect the premiums.
First up and the obvious ‘definition of disability’ which we mentioned above is crucial to policy costings, while the ‘term’ and ‘deferred period’ (also touched on earlier) plays a pivotal role in annual/monthly repayment projections. Meanwhile the risk element in the role you normally do is of paramount importance to the insurance provider and will have a significant bearing on premiums, otherwise age and medical history all figure in their initial calculations.
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