Permanent Health Insurance
Permanent Health Insurance (“PHI”) is similar to Serious Illness Cover and often covers the same illnesses but the benefits operate in a different manner. PHI provides a periodic income which is paid when the policy holder is diagnosed with an illness or disability covered under the policy where the policy holder is unable to work. If the policy holder would prefer a lump sum payment cover, then Serious Illness Cover is a more appropriate policy.
A PHI policy will have a deferred period before the income benefit starts to pay. The deferred period can vary and there must be loss of income for the policy holder to receive the benefit. The deferred period can be anything from 13, 26 or 52 weeks depending on the policy. The length of the deferred period will have an impact on the level of premiums payable under the policy. For example, shorter deferred periods will lead to higher premiums for the policy holder. This is because the benefits will be paid to the policy holder sooner and ultimately the benefits may be paid over a longer period. Once the contract is formed and the policy holder continues to pay the premiums, generally the life company cannot cancel the policy regardless of the number of claims.
PHI policies are also attractive as an individual can claim tax relief up to an annual limit of 10% of income. PAYE taxpayers can receive immediate relief as the tax relief can be taken at source from their salary. Benefit payments will attract PAYE by the life company. It should be noted PHI premiums are not deducted for the purposes of Universal Social Charge or PRSI.
PHI policies generally have maximum income restrictions regardless of the level of cover under the policy, this will usually be 66% or 75% of the pre-disability earnings after a single persons’ state-illness benefit has been deducted.
Similar to Serious Illness Cover, there can be a number of exclusions. For example, alcoholism, drugs and self-harm or dangerous activities, this is not an exhaustive list but is indicative of some exclusions you might expect in a PHI policy. As with nearly all insurance policies the principle of “utmost Good Faith” applies. This means you must complete the proposal honestly and detail any relevant health issues in order to receive benefits under the policy. In order to preserve the policy, you must continue to make the premium payments even when you are claiming benefits under the policy.
PHI can give a policy holder great peace of mind and protection in the form of monthly income when you most need it.