More seek virus cover
GUIDE TO... FIVE-MINUTE INCOME PROTECTION
AS the coronavirus puts people’s livelihoods at risk, there has been a surge in the numbers seeking to protect themselves with a type of insurance called income protection.
This pays a tax-free replacement income if you are unable to work due to health problems, which now include the coronavirus.
Insurance broker Lifesearch has reported a 25 per cent increase in enquiries, with the majority asking about the virus.
You should read the policy small print carefully because with many plans you may have recovered long before you are actually eligible for a payout.
Policies are offered by friendly societies and major insurers such as Aegon, Aviva, L&G, LV=, Unum and Vitality, usually after taking advice.
An impressive 88.1 per cent of claims were approved in 2018,Association of British Insurers figures show.
Protection specialist Kevin Carr, founder of Carr Consulting, said plans will pay if you cannot work due to coronavirus: “Some may cover periods of self-isolation as well.”
However many will get tripped up by something called the policy “deferral period.” Carr warned: “This is the length of time you need to be ill before you can claim, and is typically one, three or six months.”
Income protection is designed to cover long-term illnesses, rather than short-term shocks like Covid-19, where people may recover in a couple of weeks.
You can buy plans with deferral periods of one week or less, typically sold by friendly societies such as British Friendly, Cirencester,the Exeter and Shepherds, but inevitably these cost more.
A 45-year-old non-smoker would pay £75 a month for £1,000 monthly cover from day one, via Cirencester Friendly or the Exeter, Lifesearch figures show.
Premiums fall to £25 if you choose a six-month deferral, through Aviva, The Exeter and Holloway Friendly.
Comparison site and protection broker Activequote has also seen a spike in income protection enquiries.
Head of partnerships and marketing
Rod Jones said insurers are treating new applicants differently: “Some ask if they have lived or travelled in a list of affected countries in the past 30 days, including China, Japan, and northern Italy.”
You will not get cover if you already have the virus, while insurers are said to be lining up new exclusions, so check.
The alternative is statutory sick pay (SSP), with Chancellor Rishi Sunak announcing in lastwednesday’s Budget that anyone in isolation will be able to get a sick note by calling 111, with payments now made from day one rather than day four.
SSP is only available to employees and is worth just £94.25 a week, equivalent to just £4,901 a year, although most employers pay extra on top.
Sunak did not extend SSP to self-employed or “gig economy” workers.they may be entitled to claim Universal Credit, but any payout can take five weeks to arrive.
The new style Employment and Support Allowance will now pay from day one, but it is only available for those with two to three years of national insurance credits.
Insurance small print and benefit claim rules leave many in danger of falling through the gap and getting no cover for their coronavirus losses. Some will continue working as a result, putting everyone at risk.