Tuesday 12 December 2017

Question of Finance: What's best -- illness or income protection policy?

Q: My wife is expecting our first child. As a result I have decided it is time to get my finances in order.

I am currently trying to decide between taking out a serious illness or income protection policy -- or maybe both.

Could you advise as to the differences between the two polices?

A: A specified serious illness policy helps to provide additional security to you, your family or business by paying a guaranteed lump sum, if you are diagnosed as suffering from one of the specified serious illnesses covered by your policy during its term.

This money should ensure that your family's needs -- such as household bills, school fees, your mortgage, motor expenses and other living costs -- are met while you recuperate.

The key word to focus on here is 'specified'.

Most providers of this type of protection will provide you with a detailed description of the specified serious illnesses they cover as well as the exact conditions which must be met for a claim to be paid.

So while price is always an important factor it's just as -- if not more -- important that people know precisely what they are covered for.

Income protection on the other hand is designed to help you meet your financial needs, by paying you a form of replacement income -- or a percentage of it-- for a period of time, if you are unable to work due to sickness, disability or injury.

Therefore, unlike a specified serious illness policy, the cover is not restricted to sickness or disability arising from a serious illness.

However, depending on the size of the claim, there can be a waiting period of between four weeks to up to one year before the replacement income is paid.

Joe Charles is marketing manager with Caledonian Life.

Irish Independent

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