Income protection / state illness benefit

[Bobalin]

I am struggling to understand something. My husband was until recently sole earner. We have income protection via my husband's employment. A couple of years ago, we took out a "top up" income protection policy. My husband became ill and we have claimed on these policies. We also receive state illness benefit. The income protection via my husband's employer is being paid but minus the state illness benefit. It seems that this is industry practice (according to broker). However it seems unfair given that we are nowhere near 75% of my husband's previous gross salary (we seem to have been underinsured that's a different story). Basically, the insurance company is cancelling out (taking) our state illness benefit.
And when we took out our own top up policy, the income to be insured was calculated and the state illness benefit deducted from that i.e. presuming we would be getting it. Why would that be assumed when as it turns out now, it's "industry practise" for it to be deducted when paying out?

 

[ClubMan]

The income protection via my husband's employer is being paid but minus the state illness benefit. It seems that this is industry practice (according to broker).

That's common enough as far as I know.

However it seems unfair given that we are nowhere near 75% of my husband's previous gross salary (we seem to have been underinsured that's a different story).

You mean he was earning X and you were insured for Y and X > Y? Why was that?

Basically, the insurance company is cancelling out (taking) our state illness benefit.
And when we took out our own top up policy, the income to be insured was calculated and the state illness benefit deducted from that i.e. presuming we would be getting it.

Do you mean that your claiming on two separate policies and, in each case, the illness benefit amount is deducted?

Why would that be assumed when as it turns out now, it's "industry practise" for it to be deducted when paying out?

Have you checked the policy contracts' terms and conditions wording? That should give you all the details that you need and which were agreed to at the outset.

 

[Interest%]

I looked into his myself.
You can insure 75% of your salary.
The amount the insurance company pay out is as follows.
Husbands salary = 100k
Max Insured amount allowed is 75% of 100k= €75k p/a
State ilness benefit = €10,816 p/a
Company sick pay?? = lets say 30k p/a
Amount of income protection paid out =
75k - (10,816 + 30,000) = €34,814 p/a

 

[Bobalin]

You mean he was earning X and you were insured for Y and X > Y? Why was that?<

Various . . his salary went up in the meantime and the balance between basic pay and bonuses changed . . . .turned out the company income protection covered 66% of base salary not total renumeration. Oversight by us . . But that's just the way it happened, I only bring it up to point out that we're not approaching the 75% limit.

Do you mean that your claiming on two separate policies and, in each case, the illness benefit amount is deducted?

only the company policy has come through, the other one is still being approved. . . . hopefully that won't also deduct the state benefit!!!

Have you checked the policy contracts' terms and conditions wording? That should give you all the details that you need and which were agreed to at the outset

The issue I have I suppose really is with our broker. Agreed: insure x amount minus state benefit, that's straightforward. . . . . doesnt that presume that you'll be getting the state benefit? (and it's not going to be cancelled out)? well in that case when calculating income to be why not insure x amount + state illness (not minus it) if you already know it's industry practice to deduct it from payout! End result is that we're E800 a month down on what we thought we'd be getting.

 

[ClubMan]

Your reply is very difficult to read.
You should read this on how to quote properly.

Key Post - Replying to a post - quoting all of it; quoting a bit of it; quoting none of it

1) You can reply without quoting the post you are replying to This should be the one you use most often. 2) You can quote the entire post Please do not use this automatically Please do not use this to quote very long posts It's best to use this in a long thread where you are quoting a post...

www.askaboutmoney.com

 

[Bobalin]

I looked into his myself.
You can insure 75% of your salary.
The amount the insurance company pay out is as follows.
Husbands salary = 100k
Max Insured amount allowed is 75% of 100k= €75k p/a
State ilness benefit = €10,816 p/a
Company sick pay?? = lets say 30k p/a
Amount of income protection paid out =
75k - (10,816 + 30,000) = €34,814 p/a

Interest%
Yes seems straightward except you're missing one bit. . . ..below in bold . .which has only just become apparent to us having claimed


You can insure 75% of your salary.
The amount the insurance company pay out is as follows.
Husbands salary = 100k
Max Insured amount allowed is 75% of 100k= €75k p/a
State ilness benefit = €10,816 p/a
Company sick pay?? = lets say 30k p/a
Amount of income insured
75k - (10,816 + 30,000) = €34,814 p/a
Amount of income protection paid out =
€34,814 p/a - 10,816 = E23,998


So you see. You thought you'd be getting €34,814 p/a but you won't, you'd be getting E23,998 after the insurance company deducts state illness benefit from your payout.

 

[Interest%]

Interest%
Yes seems straightward except you're missing one bit. . . ..below in bold . .which has only just become apparent to us having claimed


You can insure 75% of your salary.
The amount the insurance company pay out is as follows.
Husbands salary = 100k
Max Insured amount allowed is 75% of 100k= €75k p/a
State ilness benefit = €10,816 p/a
Company sick pay?? = lets say 30k p/a
Amount of income insured
75k - (10,816 + 30,000) = €34,814 p/a
Amount of income protection paid out =
€34,814 p/a - 10,816 = E23,998


So you see. You thought you'd be getting €34,814 p/a but you won't, you'd be getting E23,998 after the insurance company deducts state illness benefit from your payout.

Do did they deduct illness benefit twice.

 

[Bobalin]

Well just thinking about it, in your example, there was one policy. In our example there are two policies:
1. the top up one we took out with the broker - I'm looking at the paperwork - if it goes through there is a guaranteed amount we get pw so looks like state benefit will not be deducted from payout.
2. the company one - we never got any paperwork for it - it is the one which is currently paying out and is deducting the state benefit.

So this is happening across two policies, however the result is the same. I think our broker should have joined the dots at the start and seen that this would happen, certainly if it's industry practice as he is now saying.

 

[ClubMan]

So the key issue is that the state illness benefit amount is being deducted from both insurance payments?
Didn't you read the documentation for the top-up policy when taking it out?
In my experience employers normally give some details about workplace income protection cover if not the full policy terms and conditions.
I remember being covered a few times and it being clearly stated that any payments would be net of illness benefit.
I'm not really clear what you would like to happen in this context?

 

[Carnmore]

Interest%
Yes seems straightward except you're missing one bit. . . ..below in bold . .which has only just become apparent to us having claimed


You can insure 75% of your salary.
The amount the insurance company pay out is as follows.
Husbands salary = 100k
Max Insured amount allowed is 75% of 100k= €75k p/a
State ilness benefit = €10,816 p/a
Company sick pay?? = lets say 30k p/a
Amount of income insured
75k - (10,816 + 30,000) = €34,814 p/a
Amount of income protection paid out =
€34,814 p/a - 10,816 = E23,998


So you see. You thought you'd be getting €34,814 p/a but you won't, you'd be getting E23,998 after the insurance company deducts state illness benefit from your payout.

The amount received in the example provided is made up of three component parts totalling 75%, which is the maximum amount allowable to be paid out from all sources including any state benefits.

Therefore, in this case a total of €75k would be within the rules

 

[Clamball]

I am really sorry to hear that your husband is unwell.

I think it will boil down to what your top up insurance scheme pays out.

You calculated the top up portion (say 25K) based on the info that you would be paid illness benefit. And you topped up insurance payment on this portion. So your question is will you get an income of €25K pa from the top up insurance or will you get €25K-illness benefit. So the insurance company either charged you a premium based on €25K or €25K-illness benefit. It should be in the paperwork you signed. What other insurances you had and how they treat the illness benefit would not have been taken into account. So if you thought the premiums were good value it may have been because you had only insured €25K-illness benefit.

If you think the paperwork was unclear about this you can take a case to FSPO on the basis you were missold. But read all the paperwork first. If the small print says €25K-illness benefit but if an email says €25K is covered on premium then it would appear you may have a case. It would be very difficult to prove if you just recall what you were told. Industry standard is in the fine print.

You cannot do anything about the work one as this was paid by the company.

 

[Bobalin]

I remember being covered a few times and it being clearly stated that any payments would be net of illness benefit.
I'm not really clear what you would like to happen in this context?

I think I saw that in some email from the HR dept but didn't appreciate it properly at the time (didnt help that the employer was acquired by another company just before the illness so it was very slow to get information about the benefits). You're right there is nothing to be done about it.

However the whole thing leaves a sour taste for someone on the receiving end. On taking out a policy, state illness is excluded from the amount insured "to ensure the combined benefits does not exceed 75% of total earnings." The company policy pays out minus the state illness benefit "to ensure the combined benefits does not exceed 75% of total earnings." All in a situation where we are nowhere near 75% of total earnings. How is a person supposed to actually benefit from the state illness benefit in this scenario?

The amount received in the example provided is made up of three component parts totalling 75%, which is the maximum amount allowable to be paid out from all sources including any state benefits.

Therefore, in this case a total of €75k would be within the rules

That example doesn't reflect my husbands salary situation. The maximum benefit is 75% of earnings, not just his base salary. The company illness benefit is 66% of his base salary so its way below maximum benefit for someone who has a large proportion of salary in bonuses etc.

I am really sorry to hear that your husband is unwell.

I think it will boil down to what your top up insurance scheme pays out.

Thank you Clamball. I'll have a look at the top up insurance but I have the paperwork and I think it's clear cut - made sense at the time. I don't believe I can do anything about this situation but I think it's not consumer friendly / good practice the way things have turned out - I think our advisors (we've had 2 financial advisors over the last few years) could have foreseen this and neither of them pointed out the potential implications of changing employment benefits/ salaries going up / breakdown between base and bonus changing / company policy paying out net of state illness.

Thank you everyone.

 

[Carnmore]

That example doesn't reflect my husbands salary situation. The maximum benefit is 75% of earnings, not just his base salary. The company illness benefit is 66% of his base salary so its way below maximum benefit for someone who has a large proportion of salary in bonuses etc.

I didn't say it did-I was commenting on an example not making one.

In summary, maximum income protection benefits from all sources can not exceed 75% of salary

 

[Bluefin]

I'm somewhat knowledgeable in relation to this..

Standard illness benefit scheme from the multinational sector would work as follows..
66% of base salary minus illness benefit from the state..
Pension top up
Health insurance

Value of scheme's have reduced from 75% base salary to 66% in recent years

You can always request the rules of the scheme from the supplier to determine if bonuses are eligible but I'd be surprised if they were...

 

[Steven Barrett]

The 75% of salary less State is the maximum level of cover you are allowed have (they don't want a claimant to be comfortable financially). Your husband's employer is not providing this to him, they have provided cover of 66% less State. So when he went out on a claim, this is the amount payable under the policy that they paid for.

The private cover that you took out will take State and work related benefits payable into account and you would get the payout as Interest% illustrated.


Steven
www.bluewaterfp.ie

 

[ClubMan]

I think our advisors (we've had 2 financial advisors over the last few years) could have foreseen this and neither of them pointed out the potential implications of changing employment benefits/ salaries going up / breakdown between base and bonus changing / company policy paying out net of state illness.

Were they actually (independent) financial advisers, if so what type, or sales people?