The difference between income protection and PHI

Income protection is sometimes referred to as Permanent Health Insurance or PHI – yet the two products aren’t quite the same. Traditional PHI contracts added loadings or additional costs depending on occupation, gender and other factors. Some income protection providers still add loadings for these, but at Cirencester Friendly we do not add loadings for:

  • Occupation
  • Smoking
  • Hazardous Pursuits

This means we offer the same low premiums to all Members whether you work in a low-risk occupation (such as office admin) or a high-risk occupation (such as a builder).  

Income protection compared to other protection products:

  Income Protection Critical Illness Accident, Sickness & Unemployment Permanent Health Insurance
What does it cover? Loss of earnings due to sickness or injury. An agreed specific list of illnesses. Loss of earnings due to Accident, Sickness or Unemployment. Loss of earnings due to sickness or injury.
When does it pay out? From day one of an illness or injury unless you select a longer deferred period. On diagnosis of one of the agreed specific illnesses. From day one of an accident, illness or Unemployment unless you select a longer deferred period. From day one of an illness or injury unless you select a longer deferred period.
Lump Sum or Monthly benefit? Monthly Benefit. Lump Sum. Monthly Benefit. Monthly Benefit.
How much benefit will I get? Usually between 50% & 70% of your gross income depending on the provider. Dependent on level of cover taken out. Usually arranged with a Loan / Higher Purchase or Mortgage and pays out the amount required to meet its repayments. Usually between 60% & 75% of your gross income depending on the provider.
How long will you receive benefit? Until you are able to return to work or reach your selected retirement age. You will receive one lump sum. Typically the benefit is only paid between 12 and 24 months. Until you are able to return to work or reach your selected retirement age.
What you should know! Income Protection covers your income if you are unable to work and earn a living due to illness or injury. You will not be able to make a claim if you cannot prove your earnings. You are insuring a proportion of your income therefore it is important that you notify your IP Provider of any changes to your income to avoid being over or under insured. You will receive your benefit and can use it to meet your essential outgoings like bills, mortgage, food and petrol. Critical illness will only pay out on a list of specific illnesses or conditions. If you are diagnosed with something that is not listed you will not receive any payment from your Critical Illness Provider. Accident, Sickness & Unemployment is usually linked to a Loan, Higher Purchase or Mortgage therefore the amount of benefit you receive will usually only cover that particular repayment and is normally paid direct to the creditor. It must be used to make payments against the credit agreement it was taken out against. Permanent Health Insurance is largely underwritten on occupation so those who work in higher risk occupations often pay much higher premiums or cannot get cover.