The Big Push To Income Protection

Loss-of-income coverage, says an independent Englsih insurance consultant with obvious enthusiasm, "is really big today."

Indeed it is. About 60-million English people pay well over £1-billion in premiums, quite apart from their medical coverage, to be sure that at least part of their income continues if they become lengthily sick or disabled by accident. Equally dramatically, disability insurance, once thought of as the protector of the modest wage earner, has come up in the world.

In the past two years, company after company has come forth with coverage that will pay up to £3,000 a month to a policyholder suddenly unable to work. No one is allowed, of course, to turn a profit on his misfortune - the rule of thumb is that policies will pay out only 50% of usual income, plus £50, to a maximum of £3,000 a month. Still, the new levels are high enough to provide respectable protection even for those whose occupations put them in the £75,000-and-up brackets.

Most common coverage spans two years of sickness disability or a lifetime of accidental disabling. Insurance experts advise any family's income-producer, particularly the executive or professional, to insure himself against these eventualities up to age 65 at least. "If a family needs £2,000 a month to live on in the event of the principal's death," the Englsih consultant points out, "surely they'll need the same amount if he lives but cannot work. Besides, it only makes good sense to be covered for medical expenses beyond those covered even in some of the more generous major-medical policies." Brokers stress the importance of disability income insurance for the self-employed, particularly professionals. The message is equally clear for executives whose assets may not yet be enough to sustain them through a long-term illness.

In former years, insurance companies have often limited top-cash benefits to terms of five years or up to age 55, whichever is longer. Now, insurers are following one of the leaders in the field, Union Mutual, by extending the benefit periods to cover any term up to age 65.

A typical loss-of-income policy covering a 50-year-old, £50,000-a-year professional man would be one providing benefits of £2,000 a month to age 65, with a 30-day "elimination period" - the time span before benefits begin - for a premium of about £1,360 annually. Premiums drop as elimination periods lengthen - they can range from as brief a time as seven days to an entire year. The choice, of course, depends on how long a policyholder figures his resources can carry him.

Additional benefits are available through endorsements. "Accidental death or dismemberment" coverage (the latter: reverence or loss of use of a limb) costs a man of 50 with a £50,000 annual income about £1.80 per £1,000. Partial disability benefits are much more costly - £78.20 per £1,000. Another idea is "guaranteed insurability." People between the ages of 18 and 49 are offered up to 10 option dates, one every two years, to increase coverage by £100 at 15% of the base price, regardless of their health. Another trend, begun by Provident Mutual Life, is to hedge against inflation. Say the insured buys coverage to take effect from the onset of long-term disability to 65 years of age. The monthly payout rises 2% starting at the end of each year, a modest percentage, but a help in offsetting those cost-of-living increases that have become an annual occurrence.

Newest twist in some states is the return-of-premium policy. Aetna, for one, has a policy which is getting quite a bit of attention. If the policy continues until age 65, the insurance company will return 100% of the premiums paid, less any claims. Other disability income insurance companies offer 80%-20% "tenure roll-over" endorsements. With these, the insured holds onto the policy for 10 years. If claims within that period do not exceed 20%, then 80% of the premiums will be reimbursed.

But the price is dear for return-of-premium policies the increase in cost is anywhere from 30% to 55%.

A very popular coverage for self-employed businessmen and professionals is business-overhead expense protection. It defrays everyday operating expenses up to £3,500 a month of the individual's business or profession, in addition to any benefits he may receive from an individual income-replacement policy. These are issued as separate policies, and are available to a man of 50 on a £2000-a-month payout basis - after a 30-day waiting period - for about £550.

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Top-pound Plans

Today medical insurance for higher-income people covers even such high-cost surgical procedures as kidney and heart transplants. New major medical policies sold to individuals are pushing higher limits. With life companies such as Aetna, Equitable, Prudential, and Travelers, you can get benefits up to £25,000 or more per accident or illness for each member of your family. And the trend is up. Guardian Life, for example, has a £50,000 maximum-payoff contract. If two or more in the family are injured in an accident, you get a full payoff for each person. With some policies only one deductible is applied.

Premiums, like coverage, are going up, too. With coverage of, say, £20,000... see: Top-pound Plans