Permanent Health Insurance and Serious Illness Cover: The difference
There are big differences between Serious illness cover and Permanent health Insurance (PHI), including the tax benefits. I’ll outline them here.
Permanent health Insurance (PHI) explained
Permanent health Insurance (PHI) is a protection policy offered by life assurance companies. The policy pays out a regular income if the individual insured suffers a loss of earnings due to sickness or disability lasting longer than deferred period. The deferred period can be 13, 26 or 52 weeks. The shorter the deferred period, the higher the premium you will pay.
The benefits provided by PHI are:
- A regular income
- Usually a maximum benefit is specified
- All illness covered
- A once of lump sum
- May not offer cover beyond specific amount
- Only covers specific illnesses
There are taxation considerations. The benefit is liable to income tax, with income tax relief at marginal rate up to 10% of total income. There is no personal tax liability on lump sum, and no tax relief on premium.
The loss of earned income must be due to inability to work in stated occupation. Payment is provided subject to meeting ongoing tests. The age limit is 60 or 65 years of age, and the claim can be made for years – right up to retirement. A PHI is not necessarily mortgage related. The policy can be bought stand alone or on life cover.
There is no flat rate for the insurance – costs vary by occupation and some occupations are not considered acceptable.
Serious illness cover explained
Serious illness cover is either offered with life cover or separately from life cover. Serious illness cover provides a capital sum in the event of the life assured being diagnosed as suffering/contracting an illness outlined in the policy document.
The benefit is payable on confirmed medical diagnosis of specific illness covered by the policy. This benefit is subject to a one-off test only. In terms of costs, the accelerated cover is cheaper than standalone
Which one is right for you?
If you wish us to discuss Permanent Health insurance or serious illness cover and want a quote don’t hesitate to contact our finance service department on 01-2804731 or use the contact form on the left.