Q&A with Unum
Unum invited Mumsnetters to send in questions on financial protection as part of a sponsored Q&A.
Unum says: Thanks for sending through your questions on financial protection. We've put together answers around the topics that came up most frequently.
Something you'll notice in quite a few of the answers is that they differ depending on how your policy has been supplied - whether you bought it yourself or got it through work. So we thought it would be useful to give a brief explanation of what makes these different.
If you buy a policy yourself – what insurers call an Individual policy – the insurer will look at you, your exact personal circumstances and your medical history, if relevant. They will then decide whether to offer you insurance and then charge you a price, based on the chances they see of you getting ill or dying during your future working life. There may also be accompanying terms and conditions, which apply to you and your policy.
If you get cover through your company, this works in a different way. Normally, your company takes out one policy for some or all of its workforce – a group of employees are collectively covered, so insurers call that a Group policy or Group scheme. The insurer then thinks about the risks differently. Instead of getting specific details from each individual staff-member, the insurer looks at the average of that group. For example, they might say "for 300 people in that age range, with that mix of men and women, doing those kinds of jobs, we'd expect one person per year to be off sick long-term". The insurance premium your company pays would typically cover all those staff-members, regardless of their backgrounds, up to a maximum value (the "Free Cover Level"). For extra cover above that value, the insurer would look at individual staff member's circumstances, but that's relatively rare.
There were a lot questions around pensions. This is an area we don't cover, but there is a comprehensive section on the government services and information website.
There were also a lot questions around maternity arrangements and saving for your children's university education. Both topics have been extensively covered on Mumsnet and you can find out more information about them here.
Q. Is there a provision for non-financial support, such as counsellors?
If you get Income Protection through your company, in many cases this will come with what's known as an Employee Assistance Programme (often abbreviated to EAP). This will provide you with free support and information on a range of issues from where to find childcare in your local area to advice on how to budget. It may also offer access to counselling either over the telephone or face to face. To find out if your company offers this as part of its benefits package, speak to your HR department. Certain other protection policies may also offer an EAP, so it's always worth checking your policy details.
Q. How long can you claim SSP from your employer?
SSP, or Statutory Sick Pay, is paid by your employer for up to 28 weeks. You have to earn more than £107 a week to qualify for SSP and it is paid at a weekly rate, set by the Government annually.
Most Income Protection policies begin to pay out after you've been off work through illness or injury for six months. This provides a replacement income once SSP stops.
You should speak to your HR department to find out the specific details of your own contract of employment.
Q. I've heard about PPI and other mis-selling controversies; how are your products different?
Income Protection (IP) is very different from Payment Protection Insurance (PPI). There are four major differences:
- Amount paid: IP pays a proportion of your salary each month - typically 60-80%. You can then spend this on whatever bills or lifestyle costs you choose. By contrast, PPI pays just one specified bill payment, such as your monthly mortgage payments or credit card bill.
- What it pays out for: IP pays out if you're unable to work, but this must be caused by illness or injury. PPI – also known as Accident, Sickness and Unemployment insurance (ASU) – also pays out for redundancy, which IP does not.
- Time paid out: IP most often starts paying out if you've been off for six months or more, and usually continues until either you get better and go back to work, or for a set maximum period of time, or you reach retirement age – in extreme cases, that could mean paying out for 20, 30 or 40 years. PPI begins paying much earlier – after say four weeks off, but normally lasts only 12 or occasionally 24 months, regardless of how serious your condition is.
- Exclusions: PPI policies often have multiple exclusions around both redundancy and existing medical conditions, which have made it more difficult to claim in the past. Individual IP policies can have some exclusions for previous medical conditions, however Group IP through work normally has no such exclusions, providing you were actively at work when the policy started.
Q. Does Income Protection have limitations like critical illness cover?
The first thing to note is that Income Protection is different from Critical Illness cover - these products both give you financial protection against serious illness, but in different ways.
Income Protection pays a regular monthly income if you are unable to work. Specifically, this is because of an underlying illness or injury that's stopping you – for example, the effects of stroke which leave you unable to work. So, what matters in making a payout decision is whether you're able to work, not whether you have a particular medical condition.
By contrast, Critical Illness cover pays out a one-off, lump sum of money. And it only pays if you suffer from one of a specific list of potentially life-threatening illnesses, such as cancer or a heart attack. Typically, this is a list of between 30 and 40 conditions. If you have a serious illness, but it is NOT one of these, the policy won't pay out – essentially, all other conditions are excluded. The conditions covered are clearly defined in your policy, so it's important to check your policy to know what you are covered for.
Q. How long does income protection usually pay out for?
Unum and other insurers offer a variety of Income Protection policies working to a range of timescales, which mean they can be more or less expensive. This is the case whether you buy individually or get cover through work.
Pay-outs most often begin after you've been off work with your illness for six months, which insurers call the deferred period. It can be as short as four weeks (more expensive), or as long as a year (cheaper).
Pay-out continues until either you get better and go back to work, or until you reach a maximum "term" specified in the policy. Typically, this is set at retirement age (around 65). So if you were 35 and had a serious accident that left you unable to work again, the policy could pay out for around 30 years. However, you or your company can choose a cheaper policy, which pays-out for a limited period: two, three or five years. In these cases, although they are less expensive, they will stop after that time, regardless of how serious or long-lasting your condition. Looking at Unum's own claims data, 35% of our claims last for five years or more.
Q. If you're self-employed, are you able to take out protection?
There are a number of Income Protection products available for self-employed people, although Unum no longer provides policies to individuals.
The best way to find a suitable Income Protection policy if you are self-employed, is by talking to an Independent Financial Adviser. You can find a local IFA at www.unbiased.co.uk
Q. Where is the best place to get impartial advice on financial protection products? It seems everyone has a vested interest in a particular company/product, so who can I go to for fair advice?
For impartial advice it's best to speak to an Independent Financial Adviser. You can find a local IFA at www.unbiased.co.uk. Alternatively, it's worth visiting the Government-sponsored Money Advice Service for general information on financial products and planning.
Q. Is Income Protection only available with certain employers, or can anyone who is employed have it?
Around 10% of UK employers currently have a Group Income Protection scheme, as part of their benefits package. And about 10% of private sector employees are covered through these schemes.
Yet only a small number of employers would not be able to get an Income Protection scheme due to the types of work their staff do – there are some occupations which are expensive or difficult to get insurance for.
To change this, we launched a campaign in 2011, to increase awareness of Income Protection amongst both employees and employers, and explain why it can be valuable to both.
If you're not sure whether your company has Income Protection, it's worth speaking to your HR department to find out. If they don't, it's worth seeing whether they can put a plan in place.
Q. I had cancer 10 years ago (at the age of 31). I am now in complete remission. How is this likely to impact on the cost and availability of financial products now and in the future?
For protection policies like Income Protection, the answer here depends heavily on whether you get an Individual policy, or get cover through work.
Since Individual policies look at your specific medical history, it's possible your prior cancer would make it harder or more expensive to get cover, and your previous cancer type may be excluded.
With a Group scheme, where individual histories are not normally looked at, then as long as someone is actively at work when they join the scheme, people with prior cancer histories would normally be covered without exclusions. The exception would be for Critical Illness cover which would exclude a claim for cancer but would offer cover for other serious conditions.
If you are working, it's worth speaking to your HR department to find out what financial protection benefits your company offers so you know what cover you have in place.
Q. Financial companies are all connected; who are Unum affiliated to?
We are one of the UK's leading financial protection insurers. That means we sell Income Protection, Critical Illness cover and Life Insurance to companies, to cover a proportion of their staff.
You may not have heard of us before, so you probably don't know that we've been around for over 40 years in the UK and insure more people under our Income Protection products than Aviva, Legal and General, or Canada Life – companies you're more likely to have come across.
We are part of the Unum Group, headquartered in the US which includes Unum in the US, Colonial Life (also based in the US) and Unum UK. In the US, the company was founded in 1848 and is ranked 260 on the Fortune 500. We are not affiliated to any other companies.
Q. Can you get long-term illness cover after diagnosis?
With a Group scheme, where individual histories are not normally looked at, then as long as someone is actively at work when they join the scheme, people with prior medical problems would normally be covered without exclusions. This is one reason why we believe the workplace is a good place to get financial protection. As an individual, it's more difficult and more complex.
If you have previously suffered a long-term illness, but are now back at work, any policy you do take out is likely to be more expensive – depending on how long you've been symptom-free – or will exclude your former illness under what's known as a 'pre-existing condition' clause.
Q. If I had two weeks off sick, then one week back at work due to chemotherapy, would this be classed as separate incidences of sickness or continual sickness?
Under a Group Income Protection scheme, these would be seen as separate absences. However if you were unable to work for several periods of two weeks or more due to the same illness or injury, these would be added together and count towards the amount of time you need to be off work before the payments begin.
Q. Would claiming sickness cover make it impossible to also claim government incapacity benefit?
The first thing worth saying is that state benefits for disability are complex, and going through a lot of change. For example, Incapacity Benefit no longer exists for new claimants, having been replaced with Employment and Support Allowance. Similarly, ESA itself is being modified, and will change as Universal Credit is introduced. There are also related benefits which someone might be entitled to, such as Disability Living Allowance (soon to become Personal Independence Payment). How each benefit interacts with Income Protection and other sickness cover is itself complicated!
If you were covered by a Group Income Protection scheme then this would not affect ESA benefit you could claim. Group Income Protection pays your employer, who continues to pay the employee through their payroll. This means the employee will receive something known as "salary continuance" rather than "permanent health insurance" benefit directly, which would not affect their entitlement to ESA benefit. However, this may affect other means-tested state benefits that you might qualify for.
This situation would change only if the employee left the company, and the insurer then paid the employee directly. Such payments would then be counted when assessing any ESA benefit.
If you were covered by your own Individual Income Protection policy, then this would not affect your entitlement to government incapacity benefit, but may affect other means-tested state benefits that you might qualify for.
Q. When should you inform your life or critical illness insurance provider of a change in your medical condition?
With a Group scheme (whether Life, Critical Illness or Income Protection), where individual medical histories are not normally looked at, people don't need to provide information about changes in medical conditions – unless they're one of the rare cases where they have asked for extra cover above the so-called Free Cover Level (link back here to explanation of Free Cover Level in the introduction).
For Individuals, there are many different types of policies available so it would be wise to check the terms and conditions and see what you are required to do in order to keep the cover valid.
Q. What is the difference between life insurance and life assurance (or are they the same)?
Basically there is no difference - they mean the same thing.
Due to space limitations Unum could only answer a number of the many questions asked, so they have put together answers around the topics that came up most frequently.
Last updated: 9 months ago