Two other notable elements are the percentage of salary insured and the deferred period. The maximum salary percentage hovers around the 60 per cent mark – as benefits are free of income tax this should mean payments are broadly neutral to salary. Deferred periods range from one day to 104 weeks; these work most efficiently when dovetailed with the point at which employer sick benefits cease. For the self-employed, lower deferred periods should be favoured since company sick pay is unlikely to feature.
The information that usually garners the greatest attention – monthly premiums – can be found in Table 2. Premiums can be paid in two ways: guaranteed and reviewable. The former will remain fixed throughout the plan, but the latter can be changed at certain points. This often results in an increase, and as such means that premiums, when compared like-for-like, are generally slightly lower than those guaranteed are outset.
Choosing a plan solely based on cost can be problematic, however, as it can be at the expense of the required cover.
Holloway Friendly’s Short Term plan is a good example. The reason for its monthly costs being well below the average, across the board, is that the policy pays for a maximum of two years.
Overall costs compared with our survey four years ago show some slight deviations, but nothing particularly significant. This is, however, quite telling in its own way, as premiums would usually be expected to creep up year on year.
On an individual level, there are some worthwhile comparisons to be made. For example, a four-week deferred period for a teacher who smokes, and who is 40 next birthday, would cost £20.05 per month with Holloway Friendly’s Purely Income Protection plan, compared with £212.83 per month with L&G. Evidence, were it needed, of the importance of checking terms and conditions.
Policy of truth
As with most forms of insurance, policyholders have additional options available to consider and potentially bolt on. These are shown in Table 3. Aviva is the only company that offers other linked benefits, and Holloway’s Classic Plus is the sole plan with an investment-linked option.
The other two firms that did so last time around – Wiltshire Friendly and Zurich – have not taken part this year.
Historically, a deterrent for consumers when it comes to IP has been worries that their claims will be rejected. But Mr Shaw moves to ease these fears. He says: “The statistics prove this isn’t the case, so the industry needs to be clearer on evidencing that claims are treated fairly and invariably paid out. The thing about IP is that few people will claim on it, but many of those who do are likely to recognise just how valuable the product is. Case studies emphasising the life-changing potential of IP offer compelling evidence.”
