UNUM offered an Executive Income Protection plan and we will look at the features of the plans, when we will pay out and possible exclusions that may apply. The main terms and conditions of the plans are not covered here but can be found here.
In this plan, UNUM can provide a month benefit for an agreed length of time if an employee becomes injured or too ill to work. There is also an option that will help cover some of the employment costs that continue while the employee is off work.
If you take out the executive income plan with UNUM, you are committed to a number of terms. You have to:
- Pay all the premiums on time
- Provide us with the complete and fully accurate information if required
- Notify us if the employee is no longer employed or take a break
- Tell us is the employee has any change in health between taking the policy out and the plan start date
- Chose the correct level of cover and check it regularly so it able to provide the best amount of cover
Also, if you chose to take out the policy, there are a few risk factors that you, the customer, needs to be aware of:
- If the premiums are not paid or you don’t adhere to the terms and conditions, the cover will be ended.
- If the cover is not often reviewed, you may receive less benefit than you need or more cover than you can claim and there are no refunds if this happens.
- If the information you provide is inaccurate, misleading or not complete, claims may not be paid out or cover reduced.
- Some reasons for claiming might not be covered, refer to UNUM documentation or speak to an advisor when taking out a plan for more details on what might not be covered.
- HMRC’s taxing on benefits is subject to possible change in the future.
- There is no cash-in value to the plan.
Plan deferred period
When to notify of an absence
Within 2 weeks of incapacity
8 / 13 weeks
Within 4 weeks of incapacity
More than 13 weeks
Within 10 weeks of incapacity
The Unum Executive Income Protection plan benefits are only paid out after the employee has been off for the deferred period. This is the amount of time that is agreed upon for the employee to be off work due to injury or illness. The employee must meet the definition of incapacity which is: “unable by reason of illness or injury to perform the material and substantial duties of their occupation”.
The maximum level of cover offered is 80% of earnings, but the maximum benefit to begin with is £300,000 per year. Earnings are the combined gross income and the taxable value of some non-cash benefits.
The plan’s expiry date can be any age up to the employees 70th birthday however the minimum term is 5 years. The benefit payments only begin after the deferred period which can be 4, 8, 13, 26 or 52 weeks. The longer the deferred period, the lower the cost of the plan. Benefit payments either run to the plan expiry date or for limited payment periods, either 2, 3 or 5 years. If the expiry date falls in the payment period the payments will stop and this is called a limited period plan.
Benefit payments can stay at the same level or increase year on year. There are three options for this and they are: no change, a fixed 5% per year, or inline with Retail Prices Index (RPI) capped at a maximum of 12%. If you chose to increase the benefit payments, the premiums will be higher and when the claim ends, the level of cover will go back to the amount it was before the claim was started. Any increases in benefit will occur on the anniversary of the date the claim was started.
The benefits will continue for as long as the medical evidence supports the claim. Benefits can be stopped at the earliest date of any of these factors:
- They do not meet the definition of incapacity
- The limited benefit period ends
- The plan ends
- The employee returns to work
- The employee no longer has any loss of earnings
- The employee dies
Premiums are available as either guaranteed or reviewable. Guaranteed premiums only change the cost of cover if you change the amount of benefits like increasing the cover in line with RPI. A reviewable premium cannot guarantee the cost of cover as the cost is based on a number of factors over the term of the plan that assumptions are made from with the information provided when you take out the plan. If there is a change to these assumptions, the premium rates can change and there is no limit to the amount this could change by.
If you are interested in taking out an Executive Income Plan, why not chat to one of our financial experts at Income Protection Expert and we can advise you on the best plan to meet your needs.