Contractor Income Protection/Permanent Health Insurance (PHI)
As a contractor your income is totally reliant on your ability to show up at the clients site every Monday morning. You lack the employer safety net of 'sick pay' that is enjoyed by permies but can replace these benefits through private income protection sometimes called permanent health insurance (PHI)
We only advise contractors and we do like to think that we know our stuff better than a 'Jack of all trades adviser' (in financial planning terms contractors are pretty unique and we have sculptured our advice around a thorough understanding of the issues you face- the way your paid/potentially unstable markets/IR35/ changing employment status in future/ likelihood you may go abroad to work for short time etc etc). We have access to a reasonably costed plan that pays out after a single days illness.
Any recommendation on the PHI front specifically is based around a couple of absolutely crucial factors - these will sometimes make the a plan more expensive on the face of it compared to other providers but ensures that the plan is a v comprehensive one. Unlike many other areas of a contractors finances where cost is sometimes the only consideration (with life cover you’re either dead or not so there’s no way the insurer can wriggle out of paying) with PHI the choice of company is very important, and you need to be certain that the policy is watertight in the event of a claim.
Ideally a policy will:
- cover both dividends and salary (many insurers exclude dividends and depending on whether your current/next contract is IR35 proof or not this becomes a big issue)
- insure even short term contract workers
- cover you on an 'Own' not the cheaper 'Any' occupation basis. Own occ. protects against an illnesses that stops you from specifically doing what you do now, where you do it- many policies will suggest that you are fit enough to work in the post room and cut/stop benefit.
- offer guaranteed not reviewable premiums- otherwise the insurer can and will dramatically raise costs in light of future claims experience (CJD?) and price itself out of a liability
- has as few exclusions as possible, many plans have caveats and clauses that give insurers considerable scope to dodge their obligation. If you are ill the last thing you need is uncertainty or stressful court appearances trying to get what is legitimately yours.
- must be with an insurer that has a excellent claims record of actually meeting obligations to clients
- has fair definitions of illness- where appropriate we favour a policy from an insurer that the British Medical Assoc. use for their own members protection.
- costs inflationary increases (i.e. you benefit increases by RPI each year) on the age that you joined, no matter when the increase is applied- i.e. if the extra benefit is actually applied in your 50s you are charged as if you are still your current age! As a contractor, your entire lifestyle rests on the ability to be able to fall back on an income protection policy when you need it. We've tried to give an overview of the issues concerning PHI. Please fill in the finder below and we'll get back to you with some tailored recommendations.
Income Protection/Permanent Health Insurance (PHI) "Finder"
Please read our Private Client Agreement which outlines the standard of service and procedures you can expect from us. Please also read our Key Facts about our services document which reconfirms our regulatory status and whether our services meet your needs.
As independent advisers we are pleased to confirm we can advise you on and arrange a suitable product from across the whole market and from all of their product range.
We are happy to point out that we do not charge you a fee for our services. Instead we rely solely on introducers commissions received from the insurers to cover the cost of advice and administration of any products that we arrange on your behalf. As part of new Financial Services Authority regulation however, we do offer you the option of being charged a fee instead and we will assume that you are happy to proceed on the basis that our costs are covered via the contract unless you request otherwise. . |
