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Permanent health insurance in 2023. What is permanent health insurance?

Permanent health insurance in 2023. What is permanent health insurance?

Many of us would find it challenging to pay for our outgoings, such as mortgage and rent, if we lost our income due to an illness or accident.

That's where permanent health insurance comes in. This insurance type is a long-term policy that ensures a steady income stream until you can return to work or until you retire.

Our guide will examine how permanent health insurance works and when you might need it. We will also cover what you need to look out for if you buy it.

Table of contents

  • What is permanent health insurance?
  • How does permanent health insurance work?
  • When will I need permanent health insurance?
  • Who doesn't need permanent health insurance?
  • How do I work out the level of cover I need?
  • How to buy permanent health insurance
  • Permanent health insurance FAQ
  • Permanent health insurance cost

What is permanent health insurance?

Permanent health insurance (or PHI), also known as income protection insurance, provides income to an individual if they cannot work due to injury or illness.

Many employers also call it group income protection, long-term disability (LTD), or salary continuance insurance.

Employers usually have a policy of insurance specifically in place to cover the risk of employees becoming incapacitated, which then provides a replacement income.

Note: Permanent health insurance is different than critical illness insurance. That insurance type pays out one lump sum if you have a specific serious illness.

How does permanent health insurance work?

Permanent health insurance is an insurance benefit that works in the following ways:

  • If you are unwell and unable to work, permanent health insurance provides regular payments to replace part of your income.
  • Income protection pays out until you are able to start working again - or until you retire or die or reach the end of the policy term.
  • It covers most illnesses that cause incapacitation, both short-term and long-term (depending on the policy's definition of incapacity).
  • Income protection typically pays out between 50% and 65% of your expected salary if you cannot work for any reason.
  • It often comes with an agreed waiting ('deferred') period before the payments start. Commonly the waiting periods are between 4 to 26 weeks and a year. The longer the wait, the lower the monthly premiums.
  • Unlike critical illness, permanent health insurance can be claimed many more times than once until the policy expires.

When will I need permanent health insurance?

Permanent health insurance will be helpful if you cannot work for any reason. It is especially beneficial for those who do not have any savings.

The loss of income can cause you to struggle to pay for your everyday expenses, such as mortgage or rent.

Suppose you suffer an accident or become ill, you might assume that you will receive some level of income from your employer. That would be ideal, but it's common for employees to be moved onto statutory sick pay within a six-month period.

It is uncommon to find employers who financially support incapacitated staff for more than one year. Check what your employer will provide for you if you're off sick.

If you're self-employed, It can be particularly challenging if you have no sick pay to fall back on.

Who doesn't need permanent health insurance?

Further to the above, this is when you might not need permanent health insurance.

  • If you could comfortably live on government benefits.
  • If your sick pay was enough to cover you. For example, your employee benefits package gives you an income for 12 or more months, and you can survive on that benefit.
  • If your partner or family financially supports you. For example, your partner's income covers your household.
  • If you have enough savings to financially support yourself.
  • If you can take early retirement.

How do I work out the level of cover I need?

There are steps to take that can help you estimate the level of coverage you need for permanent health insurance.

  1. Start with your annual income, then minus any work-related expenses such as travel costs, food, and clothing, and also take away the amounts that you get in benefits.
  2. Then, you should add extra costs you might need if you suffer an accident that makes you unable to work, such as medical bills. Calculate other expenses, such as medical equipment or additional energy costs.
  3. The estimated costs to add on aren't easy to predict in advance. For more advice, you can speak to an insurer who can help you to estimate these costs.

How to buy permanent health insurance

An income protection policy can be purchased from an independent financial adviser (who can pick and choose a policy suited to you), or you can buy it directly from an insurance company.

You need to have your details ready to take out permanent health insurance, whether you are shopping around or applying for a quote.

The factors that affect the insurance cost listed above will be considered when purchasing.

You must give your complete and accurate details to the insurer, who will then calculate your level of risk and estimate the cost of your policy.

At this point, you don't have to discuss sensitive information with the insurer. You can instead ask that they send the information directly to their medical officer.

Note: If you are deemed too high a risk to insure (if you have ill health or have a risky job, for example), you may not be eligible for income protection. Alternatively, you may have to pay more to take out the insurance policy.

Income protection policies cover various circumstances, so it's important to know what's on offer. You can apply for a free quote online.

Permanent health insurance FAQ

How do I know if I have group income protection?

You need to check with your employer. Not all companies provide this benefit to their employees. Some companies reserve income protection for certain staff.

Most employers specify this information in the employment contract or an employee handbook. You are entitled to ask your employer about the terms of any policy, which is usually outlined for you.

Am I eligible for group income protection insurance?

Eligibility information can usually be found in your work contract. Whether you are eligible for group income protection depends on what the policy states. Some key factors are:

  • The eligibility criteria might exclude certain medical conditions, including pre-existing conditions.
  • The time for which you have been on sick leave will affect eligibility (the deferred period) before the benefit applies.
  • You have shown that you are incapable of performing the duties of your insured occupation due to your illness or injury, as found by the insurer's medical assessment.
  • If your employer has made any reasonable adjustments to facilitate your return to work.
  • If you cannot work and are on long-term sick leave, your employer should cooperate with you by providing you with the means to apply for the benefit.

Do permanent health insurance policies cover mental health issues?

Permanent health insurance covers many circumstances and usually provides protection for individuals who are suffering from physical or mental illness.

There will be time limits to pursue your claim, so it's important to raise your concerns as soon as you can.

What does income protection insurance mean for me?

To receive income protection insurance, you must first meet the eligibility criteria and will be required to follow the terms and conditions as laid out by the policy.

Whether paid or unpaid, you must promise not to undertake any other employment while receiving this benefit. Some policies provide partial coverage if you can only work part-time or in a less qualified role.

To continue receiving the benefit, you will usually be required to remain employed. It's advisable to get specialist advice before accepting a termination package.

The insurer's medical adviser might have to assess whether you continue to meet their eligibility criteria, so you will be subject to regular reviews.

Most policies allow for some form of rehabilitative work or therapy as a benefit.

What happens if you are refused an insurance benefit?

Income insurance is usually funded by an employer taking out a policy with a third-party insurer which forms part of an employee benefits package. In this case, a contract is held between the employer and the insurer but not between the insurer and the employee.

As an employee, you still have a right of appeal if the insurer refuses to provide the health insurance benefit. Your employer will usually have to submit the right of appeal on your behalf.

If the benefit is refused after your right of appeal, you can make a complaint to the department that deals with such cases. They will then review your case and come to a decision. If this action does not resolve matters, you may choose to take legal action.

Permanent health insurance cost

The cost of permanent health insurance is affected by numerous factors. The monthly payment amount in premiums will depend on your circumstances.

  • Your age. The risk of getting ill generally increases as you age. The cost will be higher the older you are when you take out the policy.
  • Your occupation. You will need more coverage and pay higher premiums if you have a hazardous job.
  • Your medical history. The state of your health will be considered, such as your weight and if you smoke or have smoked. Those in good health will pay less.
  • The policy limits. The range of illnesses and injuries covered will affect the policy cost. The percentage of income you want to be covered will also affect the cost.
  • Hobbies and lifestyle. If you have hobbies that are considered risky, such as diving, you will pay more for insurance.
  • The waiting (or 'deferred') period. Your premiums will be cheaper the longer you can wait before you make a claim.

The overall cost of income insurance will also depend on whether you pay a standard premium (which can increase over time) or a guaranteed premium (which remains fixed for as long as the policy is active).

Guaranteed premiums are slightly more expensive short-term, but they provide long-term security for the future, which can be desirable for the insured.

Permanent health insurance quote

Group insurance gives benefits of standardized coverage for either small or large employers to serve the employee benefit needs.

Having an effective benefit plan is crucial for attracting and keeping quality employees. At Pitsas Insurance, we can offer you various group coverage options at highly competitive rates

We offer you the following:

  • Great variety of contracts from Cypriot and international insurance companies
  • Access to the most prestigious clinics in Cyprus and abroad
  • Flexible pricing to suit your company's budget
  • Quick settlement of claims

To receive a hassle-free quote, see here.

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