The objective of income replacement cover is to provide a regular income if you become unable to worth through illness or injury and suffer a loss of earnings. This is essential cover for the self employed and contractors who earn money by the hours or day and do not have the security of employer-paid sick leave and may find themselves in financial difficulties fairly quickly without a contingency plan in place

• Costs and Risk
• Assessing how much cover to buy
• Limits to income benefit that you can claim
• Earnings on which to base your cover

Costs and Risk

The cost of cover depends on several factors including your age, income, past and present health and occupation. If your occupation exposes you to greater risk than an office based role, a full job description will be needed in order to provide you with a quotation. Additional information may be required if you participate in hazardous pastimes such as diving or climbing.
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Assessing how much cover to buy

When considering how much cover you will need, you should start by consulting one of our professional advisors who will lead you through a fact finding procedure to establish the right type and amount of cover for your circumstances and the best scheme for your needs. Issues to consider include the following;

• How much income benefit will you need to cover normal expenditure
• How soon you need the income benefit to start (after 3 months, 6 months?)
• Do you wish the income benefit to increase in line with inflation?
• How long you want the cover to last for (max to age 65)

Regular monthly or yearly payments must be made to keep the cover in force. A monthly income is paid for as long as the claim is valid.
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Limits to income benefit that you can claim

In the event of a claim, the maximum income benefit paid will be the lower of:-

• The amount of benefit you have insured
• 75% of the gross annual salary you are earning at the time of your disability, less any other income being paid to you whilst you are disabled.
• The overall maximum income benefit payable per year is £90,000, US$144,000 or €144,000.

A reduced benefit will be paid if any of the following take you over the maximum allowable income outlined above:-

• Continuing payments from your employment – such as sick pay
• Other insurance benefits arising because of your incapacity
• Pension payments

Your benefit is not reduced if you receive investment income i.e. income from savings and/or investments.
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Earnings on which to base your cover

When choosing your cover remember that if you claim, benefit will be paid based on your pre-incapacity gross annual salary.

• If you are employed cover is based upon your gross annual salary before income tax
• If you are self-employed, cover is based on your gross earnings from your business, before the deduction of tax, during the 52 week period before you became incapacitated. If your earnings fluctuate, your gross earnings from your business, before the deduction of tax, during the 3 year period before you became incapacitated.

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