Many people, however, will prioritise finding a replacement income. This is especially the case for sole traders, who will not have access to employer benefits to support them. That said, company employees should also pay due consideration to the need for IP, as employer sick benefits are far from a bottomless pit.
The distinction between IP and CI is therefore crucial, as otherwise consumers may find themselves claiming a policy that fails to provide the cover they expected.
Just can’t get enough
For this year’s survey, a total of nine providers with 18 plans between them have taken part, although some of these plans have been amalgamated in certain tables. Individual policy details are shown in Table 1 and highlight the wide-ranging cover on offer. Interestingly, only two providers – Shepherds Friendly and Vitality Life – allow cover to start at age 16. All the others, with the exception of LV which is 17, have a minimum age of 18.
For most, the maximum age that a plan can be started is 59 – British Friendly’s policy is the exception in that it accepts applicants up to the age of 64. However, consumers looking to take out cover in their 60s are likely to face extremely high premiums due to the increased likelihood of making a claim.
On the subject of premiums, one of the most important considerations for intermediaries and their clients is the benefit payment period, which is the length of time after a claim that a policy will be paid. They are essentially split into two types: short term and full term. The former will cover somewhere between one and five years, whereas the latter will pay out until the earlier of retirement or the policyholder returning to work.
As a result, a shorter benefit payment period will attract lower premiums. But this must be weighed against less comprehensive cover.
Julie Higman, proposition manager of protection propositions at Aviva, says that a factor in IP’s increasing popularity has been a shift towards less comprehensive cover. She says: “There has been more focus across the industry on IP, especially with the positive impact from the Seven families campaign, and there has been more focus on going out and speaking to advisers about its importance.
“However, while sales have increased, there is more of a demand for limited payment terms as opposed to full cover until retirement. Therefore, while customers may not have full cover, limited benefit is still better than no cover.”