disability income protection.

We specialise in disability income protection. This is because many of our clients who have long-term ill health or disabilities are on, or have been on, long-term sick leave and as a benefit of their employment might be entitled to the benefit of income protection policies.

These policies provide income cover during time off work (a proportion of full income is provided which can range from 50% to 65% of full income) and in some cases, the benefits can last until retirement. Some policies are time-limited, for example will last no more than five years provided the employee continues to meet the definition of incapacity under the policy. Under an income protection policy, an insurer will provide a percentage of your income to your employer to pass on to you. Your employer is the holder of the policy and you are the beneficiary. All communications about income protection will need to be you’re your employer although special protections are available to protect sharing your confidential medical information which you are not obliged to share in full with your employer. Your employer should also continue your other employment benefits alongside this cover, such as pension contributions and holiday pay.

Types of disability income protection policies 

• Income Protection (IP)
• Permanent Health Insurance (PHI)
• Group Income Protection (GIP)

Disability income protection can take various forms, providing different benefits. Your employer should inform you if you have this coverage and explain the policy terms. Sometimes employers are reluctant to inform employees of this benefit so you should ask if they do not make you aware. This is because it can impact their ability to terminate your employment. You should not rely on them telling you. They are legally obliged to take all reasonable steps to procure the benefit for you and if they do not you may have a legal claim. 

How income protection policies work for employees

The arrangement is a contract between the insurer and your employer and you are the beneficiary. Your employer has an obligation to procure this benefit for you if they offer it as part of your employment package. If you have been off sick for a period of time (weeks) your employer should contact you to start the application process. If they do not you should contact them because there are time limits for applying. Some employees do not know if they have this benefit so it is always worth checking with your employer or their HR team. The cover is unlikely in most cases to start before 6 months of absence (26 weeks is the deferred period) with no impending date to return to work but if you are at 3-4 months and expect to be off longer we recommend that you get your application underway.

When to start an income protection application

If you have not been accepted on cover when your company sick pay ends and you eventually are covered by an income protection policy the insurer will make good any shortfall from the time your pay stops to the time the cover starts. This will be paid to you via your employer as a lump sum amount of back pay. If you are turned down and have to appeal a decision you may suffer a period of no pay but this will be repaid if the cover is accepted on appeal or following a determination by the Financial Ombudsman Service (FOS).

CAB – Income Protection Insurance

Appeals and disputes with insurers 

As income protection lawyers, we often assist clients with various issues around PHI and GIP, including: 

• Assistance with Income Protection Applications: We help clients apply for salary protection coverage giving advice on how best to present your case. 
• Help with Appealing Declined Wage Protection: If an insurance provider denies coverage, we guide clients through the appeal process. The first appeal will be to the insurer. If this appeal fails you then have the right to make a second appeal to the FOS. 
• Support with Lump Sum Commutation: We can check if the insurer and employer are open to commuting the policy but this will depend entirely on the willingness of the insurer and any deal will have to be brokered with the assistance of your employer because they are the holder of the policy. You cannot ask an insurer to commute your policy yourself. 

Lump sum commutation: Ending your policy early 

If you are receiving income protection, your payments are guaranteed as long as you meet the policy’s definition of being incapable of working. In some cases, commuting the policy for a lump sum may be an option. This is subject to agreement with the insurer and employer.

Financial ombudsman service assistance

The Financial Ombudsman provides a free service in relation to challenging income protection decisions. They can intervene and make a determination about your eligibility. You can find out more about the FOS’s invaluable assistance here:

Financial Ombudsman – Income Protection Insurance

Tax implications of income protection payments 

Disability income protection policies that are commuted (cut short) by agreement between your employer and the insurer usually qualify for full tax relief under the provisions of section 406 of the Income Taxes (Pensions and Earnings) Act 2003. In some cases clearance will be sought from HMRC. We can also assist with this process and have deep experience advising around termination payments.

disability income protection

• Group Income Protection
• Termination Payments Tax Free