Remember Income Protection when Your Income Falls
July 13th, 2007
Recently one of our clients had some problems when they made a claim on their income protection policy.
This client had taken out a maximum benefit (60% of gross salary) policy some years previously when employed on a generous salary. However, two years ago he became self employed and his taxable earnings fell by 25%, partly by design as he had intended to reduce his hours and partly because most self employed people deduct all possible expenses from their income in order to minimise their tax bill.
He then became ill and made a claim on his income protection (IP) policy, was asked for proof of earnings to ensure his level of benefits was still supported by his taxable income. As his income had fallen, they weren’t, and his benefits were reduced by the insurance company to 60% of his pre-incapacity income.
The net result is one disappointed client as he received less than he had expected, and he had also been paying a higher than necessary monthly premium for cover that he was never going to be able to benefit from.
The message here is that all insurances should be reviewed at least annually and also when circumstances change… e.g. birth, marriage, death, employment change, house move.
Author: administrator
July 13th, 2007
Category: Life Insurance.
