# Key Post: Permanent Health Insurance (PHI)



## Marion

PERMANENT HEALTH INSURANCE: (PHI)
summary of main points​
Source: Points 1-10 - Various forums on AAM:

1.  Permanent Health Insurance will pay you an ongoing income if you are unable to work for longer than 13 weeks due to *      any* illness or injury (Liam)

2  Covers up to 75% of income in the event that you are unable to work due to illness, accidents, (does not cover redundancy) (Liam)

3.   Policy kicks in after a period of time - minimum 13 weeks - but you can alter this for a longer period - e.g. 26 because, the longer the deferral period, the cheaper the premium.  If you choose a longer deferral period, you can have savings put aside to cover this extended period. (Dr Benton) 

4.  Get policy that covers you in the event of not being able to work at whatever it is you do as a profession (e.g. not able to continue working as a doctor - not just unable to work). This is particularly important to enable you to maintain your standard of living. This policy will obviously be more expensive. (Dr Benton)

5.  PHI is not necessarily mortgage related. (Liam)

6.  Claim can be made for years - right up to normal retirement age if you cannot work. (Liam)

7.  Tax relief is given  at your marginal rate. (Liam)

8.   PHI is not at a set rate - there are lots of variables - age, sex smoker, term (to age 55, 60, 65?),  occupation and whether or not you want a guaranteed fixed premium or a reviewable one.(Liam)

9.  It is difficult to get cover for any pre-existing illness.(Liam)

10.  There are a  few companies offering "stand-alone" PHI cover (i.e. you don't have to be taking out a pension or something else as well) - Friends First, Irish Life, Canada Life & Hibernian. As a general rule of thumb, Friends First provides the most comprehensive cover but is often the dearest. (Liam)

11.  Tax relief is available on premiums paid for permanent health insurance, up to a maximum of 10 per cent of salary. When a benefit is paid, it is subject to income tax. (C O'D, Irish Times article)

12.  From 6th April 2001, PHI premiums have moved to a "net basis". This means that these payments now reduce your income that is liable to payments of PRSI.(Boylandodd.com site)

13.  PHI or disability insurance is a feature of many company pension schemes, so full-time employees who are members of pension schemes should check out what (if any) cover is available through their company scheme, before purchasing additional cover. (Rainyday)

14.  You can get PHI to cover to a percentage of your pension contribution. Useful for self employed who pay their pension from their company instead of their drawn salary. (sfag)

15.  PHI pays a maximum of 75% of your income (at the time of the claim) MINUS Social Welfare benefits which (I think!) are approx. €6000 p.a. (Sarah Wellband)


Please correct any errors in my editing of the above or include any further specific points which ought to be mentioned by posting below. Thanks. 

Marion :hat


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## Tommy

*Re: Permanent Health Insurance (PHI)*

Well done Marion - very useful summary

Tommy
www.mcgibney.com


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## iarmst

*Re: Permanent Health Insurance (PHI)*

I agree with Tommy, the information supplied is splendid. Thanks Marion!

I'm looking into PHI at the minute as a replacement for my mortgage payment protection. Marion, do you think this is a good idea?

Thanks, ian.


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## Marion

*Re: Permanent Health Insurance (PHI)*

Hi Ian

Thanks for your comments. I hope you noticed, however, that my name did not appear above in any of the points on the PHI summary for the simple reason that .I merely compiled the information. Like yourself, I am learning.

Now, to your specific question. Should you replace your MRP with PHI? I'll answer by relating to my own situation.

I have a mortgage, and no spouse who might be willing to support me  in the manner to which I have become accustomed   If I were to become unable to continue working.

I definitely would not wish to survive on disability payments for the rest of my life until my pension would kick in. Hence, I took out PHI to protect myself and to provide me with an income should the worst happen. I'm sure it won't, but I would not be totally happy to take the risk on board. 

PHI is not cheap, (mine - occupational scheme- costs 1.95% of my gross income) but it is, in my opinion, money well spent for the security aspect. Most of my friends have also taken out PHI since they acquired a mortgage - it just seems to be the sensible thing to do. 

MRP only covers the repayment of a mortgage - it would not have provided me with an income to live on. So it didn't interest me as a form of insurance. 

Hope this is of some assistance. 

Marion :hat


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## iarmst

*Re: Permanent Health Insurance (PHI)*

Hi Marion,

I've checked a few examples of the amount I'd be expected to contribute each month for PHI and it does seem to be quite a large amount. However, in the greater scheme of things I'm decided that it's most definitely a valuable form of insurance so I'll be availing of it soon. As I'll ensure that the amount payable to me is the maximum I can receive (75% of income?) I'm expecting this to also cover my monthly mortgage repayments. So, there should be no need for MPP.

The question arises. Why do most people seem to take out MPP and not PHI. It appears to me that PHI is a much better form of insurance, as MMP only pays for 12 months, whereas PHI will pay me until I am 55/60/65. Am I missing something?

Thanks, ian.


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## iarmst

*Re: Permanent Health Insurance (PHI)*

I've checked my company pension scheme and it covers 75% income in the case of illness or accident up to age 65, starting 26 weeks after stopping work. So, as long as I stay with the same company, and they don't get rid of me for spending too much time on AAM (!!) I'll not be taking out PHI.

Which leaves me with MPP. It's a question of being willing to take the chance that I won't be made redundant, and if I do then for how long can I can cover repayments (to a max. of 12 months). I reckon the monthly MPP payments (€45) are too expensive and I may just stop them and take my chance.

Thanks for all the great information!

Ian.


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## bucksj

*Re: Permanent Health Insurance (PHI)  (Another alternative)*

Another alternative is Income Protection from Canada Life, you get the tax relief. (Look at the difference in cover between PHI and Income Protection as there is a difference)


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## Paul

*Re PHI and pension contributions*

Very useful thread.

The original post states that you can get cover for your pension contributions (point 14).  Is PHI claimed income considered to be earned income?  i.e. if you are self-employed are you allowed contribute 15% (or whatever % depending on age) of your PHI income to a pension scheme and get tax relief on it as if it were earned income?


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## Liam D Ferguson

*Re: Re PHI and pension contributions*

Yes if you are a PHI claimant in receipt of benefit, you can contribute to a Personal Pension in respect of the claim amount, as if it were earned income.  

Liam D Ferguson
www.ferga.com


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## Once Bitten

*ewqem*

"You are four times more likely to suffer from a serious illness before the age of 65 than to die. The financial consequences can be worse than death on a family."

www.primafinance.ie


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## flash

*PHI(disability)*

Can you get PHI if you are unemployed?


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## Liam D Ferguson

*Re: Re PHI and pension contributions*

No because if you are sick, you will get disability benefit instead of unemployment benefit.  There's no income to insure.  

Liam D Ferguson
www.ferga.com


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## Antics

*Insurance claims & Disability pension*

A friend of mine has income protection with his company pension, and was later involved in a motoring accident. He is unable to return to work & as a result received compensation for loss of potential earnings from the other persons insurance company.

Is he entitled to draw from his pension plan or has the fact that he has received compensation from another source deem this policy null and void ?

If this is the case, would payments to a PHI be wasted should you be involved in an accident ?


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## Liam D Ferguson

*Re: Re PHI and pension contributions*

Very good question.  Quick answer - if you receive a  compensation lump sum which is calculated to fully replace your anticipated income until retirement, you will not be able to claim on your PHI cover also.  This is based on one of the fundamental principles of PHI - you cannot be financially better off while claiming PHI than you were when working.  

A few relevant points arise from this.  

(1) Compensation claims are not always calculated to _fully_ replace your anticipated income _  until retirement_.  A claim which does would be based on the other party being 100% at fault, you being 0% at fault, and there being no possibility whatsoever that you can ever return to work.  The claim may be calculated to replace a lower amount, or for a shorter period.  In such instances, your PHI may be used to supplement the income. 
(2) A compensation claim may take years before you receive it. The PHI cover will replace your income until then.  
(3) If your employer has paid for the PHI cover as part of a scheme, the accident arises in the workplace and you are suing your employer, the PHI cover will probably be used to reduce the amount of compensation you will receive in respect of loss of future earnings.  

Liam D Ferguson
www.ferga.com


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## chronic

*insurance*

Hi, I am in a situation where I WOULDN'T get that insurance due to a serious pre-existing condition. Is there anyone who gives insurance in the event of hospitalisation or illness that will either pay out some sort of weekly amount while you,re ill without having to give previous medical info. I am in full time employment . Any ideas greatly appreciated.


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## MOB

*Irish Life PHI quote*

I just got in a quote for PHI from Irish Life.  They were significantly cheaper than anybody else, but on reading the small print (which to be fair to Irish Life is writen in very plain English) the basis for the quoted premium seemed to be:

a)  The level of cover goes up by 5% p.a. (this is separate to the indexation of the benefit after making a claim), but the premium goes up by "more than" 5%, though they won't say how much

b) The quote includes a hospital cash benefit;  I suspect there is one reason only for bundling benefits this - i.e. to make it less easily comparable to other products

c)  They also reserve the right to alter premium in the light of claims experience.

So, for an insurance product which you take out based on the expectation that the monthly payments will provide long term protection, they effectively reserve the right to jack up the price whenever they like, particularly a few years down the road, when you perhaps can't get a reasonable quote from another insurer.   No wonder they can undercut on the initial quote.  As far as I can see, an insurance "contract" with Irish Life based on this quote is about as useful as a bucket of warm spit.  Is this normal practice in this sector of the insurace industry??

BTW, Liam (or any other AAM broker if Liam doesn't do PHI):
 35yrs and 6 months, no illness, no medical history of any consequence, non smoker, very moderate drinker (less than 4 units per week, probably less than this per month), male, solicitor, what price PHI on own occupation basis?   Fixed benefit would be fine, (of course, escalating if there is a claim) as I expect PHI to become less important to me over the next 10/15 years.  You might as well have the commission as the broker who sent me the above rubbish from Irish Life, and I would have posted sooner, but a colleague was looking after this.


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## Liam D Ferguson

*Late Reply!*

Sorry for the delay in replying.  I've been away from AAM for a while...

Chronic - Any company that doesn't ask for medical information will most likely have a clause excluding existing conditions from cover anyway, and would be worthless to you.  If your condition is likely to manifest itself in only one area of your body, you could investigate the possibility of asking an insurer to exclude that area of your body, and cover all else.  But if your condition is likely to disable you from working entirely, I'm afraid you will have difficulty getting this cover.  

MOB - Friends First will offer cover on the following basis.  Guaranteed fixed premium - no review possibility.  There's an option to increase your cover every three years by 20% but you can turn that down without affecting your existing cover.  If you want cover to include increases during a claim, you must have it increasing prior to a claim also, but Friends First have a standard rate of 3% built in for both benefit AND premium.  Friends First product also includes hospital cash (one seventh of the weekly benefit for each day in hospital excluding the first seven).  

Cost of cover in the circumstances you describe above (but subject, naturally to acceptance by the insurance company) would be €11.92 per month per €100 per week cover plus €2.54 monthly policy fee.  (Cover after 13 weeks, includes 3% annual escalation and ceases at age 60).  

Regards, 

Liam D Ferguson
www.ferga.com


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## Bentlesx

*PHI in pension*

We want to introduce a PHI as part of the pension scheme and need to know:
a. Is it tax free like the pension?
b. How do we work out how much to deduct of each employee if we have a total figure quoted for everybody who works here?

Thanks you.


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## StevieC

Bentlesx said:


> We want to introduce a PHI as part of the pension scheme and need to know:
> a. Is it tax free like the pension?
> b. How do we work out how much to deduct of each employee if we have a total figure quoted for everybody who works here?
> 
> Thanks you.


 
It can avail of tax relief like a pension. The provider of the quote should be able to give you a breakdown of the premiums at member level, even if they have supplied you with a unit rate. The alternative is to charge a flat rate per person but this isnt really fair as it means that less well paid staff subsidise higher paid staff.

If you have already obtained a quotation, the provider of the quote should be able to provide a break down for you.



www.CheaperLifeAssurance.ie


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## Bentlesx

Thank you StevieC. Very helpful.


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## Aodhán

Exemplary thread on an exemplary website. _Go raibh maith agaibh_.


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