If you are taking out income protection the cost of premiums will reflect a number of variables. Since these schemes pay out in the event of illness, it is natural that any pre-existing condition might affect the cost of premiums or the condition may be excluded in the terms of cover.

The possibility of serious injury that might necessitate a claim is also partially dependent on your current state of health, for example, an ongoing back pain could develop and eventually prevent you from working altogether. In some cases a pre-existing condition may even prevent you from taking out some types of policy.

This article looks at some health problems that affect income protection, as well as looking at the deferred period, which dictates when you can make a claim and investigates if you can be refused income protection because of a pre-existing condition.

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Things to check that your Income Protection covers

Before we look at the health problems that affect income protection, it’s worth checking that you are actually insuring yourself for what you think you are. Ideally, you will want to get a type of cover called “own-occupation”. This insures you against any illness of injury which prevents you from carrying out your regular occupation. Some policies will only pay out if you are unable to do any form of work. If you are occupied in a highly physical role, the policy may not cover you if you could theoretically do a desk job, even if you can’t get a desk job.

Different policies will offer different levels of covers and may be set up to exclude certain conditions. You should check that the policy schedule provides the level of cover you need, and also make sure that it will pay out when you need it to. The policy can be set up to defer payment for example if you have savings that you would spend first, or if your employer will pay you for a period of time while you are off sick. If you are taking out  income protection, you will need to check if the payments are index linked in the event of a claim. If not it is possible that you may see the value of your payments dwindle with inflation over time.

When can I make a claim after taking out a policy? 

There will usually be a deferred period during which the policy will not pay out. This depends on a couple of factors. Firstly, income protection will only pay a set percentage of your income to ensure you are not in a better financial position due to illness. Any income still being received could affect the benefit paid from the policy so it is important this is considered before a policy is taken out. Even the best employment contracts will usually only pay an employee for 12 months.

Once any other benefits cease you may claim income protection to make up the shortfall, however, you can also opt to extend the deferred period when setting up your policy in order to keep the cost of premiums down. This might be worth considering if you have significant savings that you can draw on but take care not to set too long a deferred period, thereby leaving yourself short. If your policy is a short-term income protection then it will only pay out for the duration stipulated, typically two years per claim. If on the other hand, it is a long-term policy it should pay out until your normal retirement age or an age of choosing, although 70 would be the maximum age.

Can I be denied Income Protection because of a pre-existing condition?

Although it is perfectly possible for an insurer to turn down an application because of specific health problems that affect income protection insurance, it is quite likely that instead there will be a clause, or clauses, preventing a claim being made for a pre-existing condition even if not notified on the application. 

With income protection policies there will be a series of specific medical questions and failure to disclose any known condition when specifically asked may cause problems should a claim be made. The precise nature of the exclusion may vary between different insurers and plans, and it may refer to conditions being either directly or indirectly caused by the pre-existing condition.  

If an exclusion is placed on a policy, typically mental health or muscular conditions, then it can be reviewed by particular providers if a period of time, normally 5 years, has passed since last symptoms or last treatment. In that instance, the exclusion could be removed and should there later be a claim for that condition it would not be treated as pre-existing.

It is not possible to give a full and complete picture in a brief article on health problems that affect income protection, so this should be taken as an overview to help point you in the right direction. Policy conditions can vary with different contracts, and between different insurers and the level of complexity of this type of product means that you should seek expert advice before taking out a policy. Be sure to read all the terms and pay particular attention to anything which company representatives highlight to you.

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