My client has an individual IP policy, but his employer is offering group IP cheaper for the same level of cover, plus an employee assistance programme (EAP). It is unlikely he will work for the same employer for life and this policy has a continuation of cover option. Should he take out a small level of cover on the group scheme alongside his individual one to access the EAP, transfer all his cover to the cheaper group scheme, or is he better off maintaining his individual policy alone?
Mike Izzard, Premier Choice
This is always a difficult question to answer, and I would confirm whether the employer is asking him to pay for this (it then becomes a voluntary scheme), which is not the best way to do things as the benefit is taxable.
Other issues to consider include: if the employer actively markets the scheme, it may move to an insurer without a continuation option and if the client leaves he may be left without cover if he is uninsurable. Typically, an employee cannot decide what level of cover they take out as this would make the scheme discretionary (unless, again, it is a voluntary arrangement which the employer may wish to arrange).
In my opinion, it would always be better for this person to elect to go on the group scheme as he would benefit from the EAP, and also the premiums would be more cost-effective.
What the member must be careful of is if his group income protection scheme were ever to transfer to an insurer that does not guarantee a continuation option, then at that point he must decide to take the option up with the existing insurer, or if his health allows it, to consider taking out an individual scheme depending on his circumstances prevailing at that time. If he leaves the employer at any interval in the future, then my advice would be the same.
Achieving the cheapest premium should never be the driver for the advice given, but an adviser should always consider the most effective route for achieving continued cover for a client’s permanent IP needs, while undergoing a transient employment history.
Bonnie Burns, Legal & General
As always, the client’s needs should be at the heart of the decision-making process to determine the best product approach.
It’s important to understand how long your client could financially survive while being off work sick, the length of payment period they would need, any employer sick pay scheme in place and their level of savings. These will help you start to identify the product or solution that fits. Generally speaking, the employer would pay for the group IP policy, so this should be considered against the client’s affordability now and the future implications. The continuation option would allow your client to retain their cover after ceasing employment, though based on premiums payable at that future age.
For group and individual IP to sit alongside each other, the fit of the payment period and deferred periods of both is key. How well they dovetail together minimises any other insurance issues at claim time and will ensure smooth transition between claims.
This is an all too common scenario where arguments can be made for all three solutions. It’s only after balanced consideration and an understanding of the client’s circumstances that you will be able to recommend the best product approach.
What is most important is that your client is covered by some form of income protection, especially now more than ever with uncertainty around government welfare.
Andrew Stephenson, Aviva UK Health
Given the complexities of the products, it is important that you know as much as possible about your client’s personal circumstances before a decision can be made. This includes factors such as the frequency he changes job, his medical history, occupation and level of cover required to meet his needs.
You also need to understand the eligibility to join the GIP scheme and what level of cover is offered. This includes the proportion of income covered and length of benefit term. Although there is a continuation option available on the GIP scheme, it is important that your client understands the terms imposed should he leave the company.
If it is appropriate for your client to move to the GIP scheme, he will benefit from a core level of cover (funded by the employer) and the option to reduce or increase this cover at certain pre-agreed times. The cover is likely to cost less and is usually free from medical underwriting within the free cover limit.
GIP policies can also offer additional benefits such as the EAP mentioned. Aviva, for example, offers its GIP customers a 24-hour GP helpline, EAP and discounts off a range of products and services.
In the event of a GIP claim, the benefit is paid to the employer, who normally passes it to the employee as a continuation of salary. This is taxed under PAYE and the premium is not treated as a benefit in kind.
The final decision will depend upon your client’s personal circumstances and plans for the future, as well as the depth of cover offered by the GIP scheme.
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