Reader Question: What is the difference between income protection and health insurance?
Hi, I was looking for some cover in case I become ill as I am the main bread winner. I've seen a lot of terms banded about such as income protection insurance as well as health insurance. But what is the difference between income protection and health insurance, as I thought they were pretty much the same thing? If you could shed any light that would be great!
Thanks
Daniel
My response:
Hi Daniel, you are not the first and certainly won't be the last person with this question. So below I've pulled together a round of what each type of policy does and when someone might need them. I hope it helps.
Damien
What is income protection insurance?
income protection is designed to provide an income if the the policyholder is unable to work due to sickness, or as a result of an accident- benefits will be paid until the policyholder returns to work or retires or reaches the end of the policy term, which ever happens first
- benefits will only commence once a pre-agreed deferred period has passed, this is generally between 1 and 12 months, the longer the deferred period the lower the premium
- income protection insurance is a long term policy with monthly premiums
- the amount of income covered is often 60-65% of the policyholder's monthly income normally
- any benefits are received tax free unless cover is provided free by an employer
- pre-existing conditions are not covered under an income protection policy
Why do I need income protection insurance?
- if you only receive your full pay for a limited period of time when off work
- to make sure your basic living expenses are covered whilst off work
- if you receive only statutory sick pay when off work
What is health insurance?
- also known as private medical insurance or PMI
- pays for medical treatment either in a private hospital or as a private patient in a NHS hospital
- does not cover normal GP services
- cover for pre-existing conditions may be restricted or excluded by the terms of the policy
- premiums are paid monthly and may be supplied by an employer as an employee benefit
- premiums may be increased or certain conditions or restrictions applied
- there may be limits to the amount covered for some treatments and hospital stays
- in normal circumstance patients are referred by their GP and can then get immediate treatment, avoiding any waiting time
- does not normally support ongoing check ups following initial treatment
Why do I need health insurance?
- everyone already gets free treatment under the NHS so health insurance cover is not essential
- health insurance will allow you to get immediate treatment for any illness
- you may also get to the latest treatments and drugs which are not available under the NHS due to cost restrictions
- you can choose the surgeon and hospital where you are treated from the insurer's approved list
- some critical conditions will have to be treated under the NHS as not all private hospitals can accommodate them
