Tuesday, 27 November 2007

PHI Insurance

Permanent Health Insurance (PHI)

The Permanent Health Insurance (PHI) contract is designed to produce an income for people unable to work due to ill health from any cause.
This scenario is much more common than most people realise, and a lot of people who have a problem get a serious shock when they find how little money they have to live on.
State benefits are sod all, and if you are employed you should find out where your employer stands.
He may have a policy that will pay out for you.
He may have a house rule of 6 months pay.
If there is a pension scheme you might have benefits from it, ( get them quantified, and remember to check your salary definition, esp. if you get commission, bonus, or overtime ).
There may be no formal system in place at all, and it is at his discretion.
They may sack you on the spot or simply give you the usual months notice.
Remember that at the end of the day , no matter how much he may want to support you , your employer is going to have to stop your salary at some stage simply because he won't be able to carry you. Find out where you stand.
If the amount is not enough see about a Permanent Health Insurance (PHI) policy.
Policy details
An income, which can be inflation protected, until retirement. You can normally insure up to 50-65%* of your gross income, (this varies from provider to provider).
Note, if you are arranging your OWN PHI policy, and are not going to be covered by a group scheme then in the event of a claim your income will be tax free. The policy will normally pay out some time after the date at which you stopped working. The shorter this period, the greater the premium. Most people opt for three months, six months or twelve months, according to their position. (Clearly if your employer will pay for six months you don't need the policy to pay out before this). The premium depend on age, occupation, and will normally exclude pre existing conditions.
Watch for the definition of disability. Normally an " own occupation" basis it can be, ( esp. for those in risky jobs, or for whom a small problem can be a disaster), " own or any ", which means that they can take a very tough view of any claim.
Also be aware that many policies are reviewable. This means that if the overall claims, ( not your individual ones, but those of all policyholders ) , are greater than expected they can increase the premiums across the board to all policy holders.
This means that companies can try to buy business with low premiums, only to increase them in later years. Because of this hazard the cheapest quote may not be the best. What you need is "own occupation" from an insurer who has had long experience in the PHI arena.
* If your PHI is arranged by your employer under a group scheme then benefits ARE taxable. However you can be covered for up to 75% of income.

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