Income Protection & Private Medical Compared
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Comparing Income Protection and Private Medical Insurance
Both policies are intended to help protect an individual during medical issues. The job of Private Medical Insurance is to pick up the bill for the private diagnosis and the treatment of non-emergency, acute medical issues. Income Protection’s purpose is to provide the policyholder with a replacement income in the event that a medical issue prevents them from being able to work.
What policy is best for the individual can only ever be suggested on a case-by-case basis and will be determined by many different factors. Consideration should be given to the policyholder’s age, occupation, dependents, financial assets and commitments, any pre-existing health issues and what policy provides them with the greater peace of mind.
Of course, this level of advice requires a consultation from an experienced, FCA regulated Insurance Advisor that can advise on both types of insurance. Whilst Black Lion Insurance focus on Income Protection, as part of Halo Consulting, the company’s team include consultants with tremendous experience in providing advice on both types of policy.
The Cost of Medical Issues
In order to make an informed decision as to what type of policy may be the better option, it helps to understand how each policy may be able to help in different medical scenarios. There are many common medical issues that can cause prolonged periods away from work which can often result in a financial loss greater than the original private medical bill.
Whilst it’s true that you can’t put a value on good health, you can place a value on the cost of private care. Indeed, with an increase in those opting to self-funding private medical care, the costs for many private procedures are readily available online.
When it comes to placing a value on an individual’s ability to earn an income this is far more straight forward. Serious health issues that result in the permanent incapacity can cause immense financial loss. For example, the total earnings of a 40 year old on £50,000 a year who works up until retirement age and sees their wage increase by 3% each year comes out at just over £2 million.
The information below looks at how both policies may be likely to work in the event that a policyholder suffers from broken bones, a number of common chronic conditions and cancers.
Since the individual terms of Private Medical Insurance and Income Protection policies available to UK consumers vary, the examples below use some generalisations. Scenarios consider that any medical issue is not a pre-existing condition.
Broken Bones
Accident Scenarios
An accident causes a bone to break or fracture. Less severe injuries would be considered a clean, single break to a limb whilst more severe injuries would see multiple broken bones, a complex fracture or a severely damaged joint such as ankle, knee, hip, wrist or shoulder. Possibly the most severe cases of broken bones to consider are those that affect the back or neck.
Emergency Medical Care
The emergency medical care provided for broken bones will almost certainly come from NHS accident and emergency. It’s a common misconception in the UK that those with Private Medical Insurance will receive emergency care in a private hospital. This won’t happen. In the UK, Private Medical Insurance doesn’t cover emergency care and private hospitals do not have such things as 24/7 private accident and emergency services.
Most breaks or fractures are unlikely to require surgery. However, severe breaks, multiple fractures and breaks to weight bearing joints are more likely to need some kind of surgery to ensure they heal correctly. If this is the case then the surgery will generally be classed as urgent, provided within hours or days and not something the patient will be placed on an NHS waiting list for.
Recovery & Further Treatment
Broken Bones Income Protection Claim
Depending upon the severity of the injury and which bone(s) have been broken, recovery is usually anything from 6-8 weeks for something like a clean break for a broken arm to upwards of 6 months for a complex broken leg or weight bearing joint.
If a policyholder with an Income Protection plan that has a 30 day deferral period is unable to work for 60 days, then it is likely that they would receive a full monthly benefit from the insurer.
A complex break or multiple fracture can easily prevent an individual from being able to work for 6 – 12 months especially if their occupation relies on the strength or dexterity of the injured area. In this case, a policy with a monthly benefit of £2,500 per month paid after the first 30 days could be seen to have a value of between £12,500 – £27,500.
In the most severe cases it is possible that a physical accident could permanently prevent an individual from pursuing their occupation. If this were the case then, depending on the level of cover chosen by the policyholder, a long-term Income Protection policy could provide a replacement income right up until the age of retirement. For a 30 year old whose policy has a monthly benefit of £2,000 a month, that equates to a total of £864,000. That’s without considering how the policy may be set up to increase inline with inflation.
Broken Bones Private Medical Insurance Claim
In many cases involving broken bones, it would only be during the recovery period where a policyholder may be able to make a valid claim against their Private Medical Insurance. Some (but certainly not all) policies may contribute towards the cost of private physiotherapy sessions. However, this is unlikely to be unlimited an even some of the most comprehensive policies would cap the number of sessions to 10 or even less.
With the cost of physiotherapy sessions varying from £70 – £100 per session, more comprehensive Private Medical Insurance policies are therefore only likely to contribute a maximum of approximately £1,000 towards treatments. A requirement for 10 physiotherapy sessions would imply that the injury took much longer to recover from.
In the event that the sustained injury is so bad that it later transpires the patient requires a replacement joint such as a hip or knee, then a Private Medical Insurance policy is likely pick up the bill for this which would otherwise cost somewhere in the region of between £12,000 and £20,000.
Chronic Conditions
Chronic conditions are generally defined as those that will continue indefinitely, need ongoing or long-term monitoring and treatment or have no known cure.
Common chronic conditions include: Asthma, COPD, Coronary Heart Disease (CHD), Diabetes, Kidney Disease, Liver Disease, ME (Chronic Fatigue Syndrome), Multiple Sclerosis, Rheumatoid Arthritis and Strokes.
Given the broader coverage for Cancer treatments and ongoing care provided by private medical insurers the article deals with Cancer separately below.
Income Protection Claims for Chronic Conditions
In general, the main difference between Accident & Sickness policies and long-term Income Protection plans is how long the cover will continue for. Accident & Sickness may not be the most suitable for long-term chronic conditions as these policies are renewable every 1 or 2 years. At the point it is renewed, the condition may be excluded from cover, or the monthly premiums may increase.
To mitigate the potential financial consequences of chronic conditions, a long-term Income Protection policy is far better suited as these types of policies can be set up to cover the policyholder right up until the age of retirement. Since chronic conditions can become more debilitating over time, this provides the peace of mind that whilst the policyholder may still be able to work today, if in future the condition brings about more challenging symptoms which prevent them from being able to work, they can rely on the replacement income the policy will provide.
Additionally, Black Lion Insurance often recommend that those taking out an Income Protection policy choose an Incapacity Level of “Own Occupation” which although is likely to increase monthly premiums, means that a claim can be made should the issue prevent the policyholder from being able to fulfil the requirements of their specific occupation.
Possible Scenarios
The scenarios below look at possible outcomes for policyholders who have been diagnosed with a new chronic condition and where an Income Protection policy with an “Own Occupation” incapacity level is in place.
Asthma
For the vast majority of asthma sufferers, the condition has minimal impact on their ability to work. However, for some occupations Asthma may be more debilitating especially where dust, sprays or chemicals are used. For the very few with severe or poorly controlled asthma, it is more likely that Income Protection could provide financial support especially if the policyholder would in some way be legally prevented from being able to work due to severe Asthma. For example an Airline Pilot would likely have the licensed removed if they had severe Asthma.
COPD (Chronic Obstructive Pulmonary Disease)
In many cases, COPD can be managed well enough for individuals to continue working. However, for professions that require the individual to undertake intense physical activity or exposes them to irritants, COPD can be disabling. For example, a construction worker who is regularly exposed to dust and fumes and has a significant decline in lung function, may find it impossible to continue working. In this case an Income Protection policy is likely to ensure that the policyholder receives a replacement income until the policy expires.
CHD (Coronary Heart Disease)
Many with CHD can often manage the condition with lifestyle changes and medication to ensure that they can continue working. However, severe cases might make certain jobs permanently untenable. For example, those that have strenuous or highly stressful jobs may be advised that their profession increases the risk of suffering further coronary issues.
Diabetes
For many Diabetics the condition is thankfully easily manageable and has minimal impact on their ability to work. However, current legislation in the UK prohibits insulin users from certain occupations (such as emergency services, airline pilots and cabin crew and offshore workers). Therefore, a policyholder who develops type 1 (and possibly type 2) diabetes and is employed in an occupation that prohibits insulin users, then they would most definitely be unable to continue working in their own occupation. Additionally, where complications such as diabetic neuropathy (nerve damage) in the hands arise, this could severely impact specific job functions. For those who’s occupation requires a high level of dexterity in the hands the complication could potentially be career ending.
Kidney Disease
Depending on the stage and severity, kidney disease may or may not interfere with work. A policyholder working in a physically demanding job or one requiring regular travel might find it impossible to continue if they require regular dialysis.
Liver Disease
The earlier stages of liver disease are unlikely to cause too many complications for the sufferer when it comes to work. However, as the disease advances, roles that are physically demanding or that require a great deal of concentration are likely become extremely difficult.
ME (Chronic Fatigue Syndrome)
The symptoms of ME vary although decreased energy levels and cognitive function are common issues which are likely to be a hinderance in a wide array of occupations. If ME does not completely prevent the sufferer from working, it may require a substantial reduction in hours. In this scenario, if earnings fall below the policy’s monthly benefit, an Income Protection policy may make up the shortfall in earnings.
Multiple Sclerosis
The unpredictable and progressive nature of multiple sclerosis can make jobs requiring fine motor skills or extended physical activity very challenging or even impossible. For many occupations, impaired vision and hand tremors could prevent the policyholder from working.
Rheumatoid Arthritis
Whilst many sufferers are able to manage their symptoms with medications, rheumatoid arthritis can have a debilitating impact on manual dexterity and mobility. This can make jobs that require dexterity challenging and physically demanding roles too painful. A carpenter with severe RA might find it impossible to continue in their trade. Income Protection would then offer financial support.
Stroke
A stroke could have sudden and severe implications for the ability to work, depending on its severity and recovery outcomes. Those who experience speech and language impairments after a stroke might be unable to continue in their own occupation especially if verbal communication was required.
Private Medical Insurance Claims for Chronic Conditions
Diagnosis, Tests & Scans
In some cases an undiagnosed chronic condition may only first be detected as a result of a medical emergency. For example a heart-attack or stroke. As explained above, in most circumstances, medical emergencies will be dealt with by the NHS and not by private hospitals. If emergency surgery is required then it is highly unlikely that an individual with Private Medical Insurance will have any choice in whether that operation is carried out in an NHS hospital or a private one.
More often, the path of diagnosis for a chronic condition will start with the patient seeking an appointment with their local GP. Both Private Medical and Income Protection policies may help expedite this as many insurers now offer online and virtual GP services as an additional benefit to their policyholders.
The next step in the eventual diagnosis will be the referral to a specialist. This is where Private Medical Insurance policies may begin to benefit the policyholder. Only if the policy has outpatient cover will it likely cover all or some of the costs of a private consultant together with any diagnostic tests and scans.
However, it should be stressed that there are some Private Medical Insurance policies that do not cover the costs of out-patient appointments, tests and scans which are required before treatment. For example, Bupa’s Treatment and Care Health Insurance Policy is designed for those who are happy to be diagnosed by the NHS and the policy focuses on insuring treatment.
Initial Treatment & Ongoing Care
It is another common misconception that Private Medical Insurance covers all ongoing surgeries, treatments, prescriptions, consultations and monitoring of a newly diagnosed condition. When it comes to chronic conditions, Private Medical Insurance in the UK is designed to cover the initial treatment required to stabilise the patient up until a clearly defined treatment path is in place.
After the diagnostic and initial treatment phase, once a chronic condition is stabilised or manageable, many policies will become far more limited or cease entirely. At this point the patient is likely to receive ongoing care from the NHS.
There can be exceptions here such as if the patient suffers an acute flare-up of the condition in which case some policies may cover the cost of further private treatment.
Whilst some policies may have specific provisions or additional plans that extend to the management of chronic conditions, these can be more expensive and may have limitations.
Likewise, in the UK there are procedures that almost definitely will not be covered by any insurer. For example organ transplants are generally not covered for multiple reasons. As complex and high-risk procedures they require pre and postoperative care along with lifelong medicine to prevent the recipient’s body from rejecting the organ. Furthermore, unlike operations that involve medical implants that have been highly engineered and consistently manufactured to the same exact standards, a donated organ introduces very complex issues regarding liability if the organ were to be rejected. Instead, organ transplants are undertaken within the NHS, which has well established pathways for handling such complicated issues.
Private Medical Insurance Cover for Chronic Conditions
Example of treatments that are either likely or unlikley to be covered with a Private Medical Insurance policy for common chronic conditions.
| Chronic Condition | Likely to be Covered | Unlikely to be Covered |
|---|---|---|
| Asthma | Diagnosis, initial consultations | Routine prescriptions, long-term monitoring |
| COPD | Diagnostic tests, initial consultations, for exacerbations | Long-term oxygen therapy, ongoing medications, routine check-ups |
| CHD (Coronary Heart Disease) | Initial diagnosis, angiograms, angioplasty, bypass surgery | Ongoing medications, routine check-ups, lifestyle management |
| Diabetes | Diagnosis, initial consultations, self-management education | Long-term insulin/medication, routine monitoring, diabetic supplies |
| Kidney Disease | Diagnosis, acute treatments for severe symptoms | Long-term dialysis, kidney transplants |
| Liver Disease | Diagnosis, initial consultations, acute treatments for severe symptoms | Long-term management, liver transplants |
| ME (Chronic Fatigue Syndrome) | Diagnosis, initial consultations, tests to rule out other conditions | Ongoing management, alternative therapies, long-term medication |
| Multiple Sclerosis | Diagnosis via MRI, initial consultations, treatment for acute flare-ups | Ongoing disease-modifying medications, long-term physical therapy |
| Rheumatoid Arthritis | Diagnosis, initial consultations, joint injections | Long-term medication, ongoing physical therapy, routine check-ups |
| Stroke | Post-stroke care and acute rehabilitation | Long-term medications, ongoing rehabilitation, home-based care |
Cancers
Cancer & Private Medical Insurance
With so many families affected by cancer every year, it is no wonder that it is one of the primary reasons many people take out Private Medical Insurance.
Because of this, many insurers include enhanced inpatient cancer cover as standard. This can mean faster diagnosis, access to treatments, drugs and therapies that may otherwise not be available through the NHS.
With the cost of many of these treatments running into tens of thousands of pounds, the concept of self-funding private care is beyond the reach for many people with sadly no guarantee that the treatment will work.
For those who are particularly worried about cancer and the speed at which they may be diagnosed and receive treatment on the NHS, a private medical insurance policy with outpatient cover can provide peace of mind.
Self-Funding Cancer Tests & Diagnosis
Although self-funding cancer treatment is likely to be cost-prohibitive, self-funding the costs of a private consultant and the necessary tests to expedite a diagnosis may still be a viable option. For example, The Royal Marsden publish the estimated costs of self-funding diagnostic tests for a number of common cancers. The estimates are as low as £340 for Colorectal cancer tests, £420 for prostrate and £560 for breast cancer tests.
The recent changes to the NHS cancer targets due to commence October 2023 aim to diagnose 75% of cases within 28 days. Self-funding a private diagnosis could provide results in a matter of days saving priceless time and still allows for the cancer to be treated on the NHS.
Cancers and Income Protection
All cancers are serious medical conditions and ideally diagnosed and treated as early as possible. Fortunately, some cancers which are diagnosed early can be treated surgically which perhaps means that the patient may not require radiotherapy or chemotherapy.
For example, it is possible that melanoma and basal cell skin cancers, cervical, testicular, prostrate and thyroid cancers may be treated surgically if caught early enough. In many cases this means patients can return to their normal daily activities within a few weeks of their treatment. In the fortunate scenario where the patient is back to work within 30 days, if they have an Income Protection policy it is likely there will be no claim.
However, there are many other types of cancer that have the potential to lead to significant periods of time where the patient is unable to work. Even with the most positive outcomes from treatments and therapies, many cancers will still take required between 3 and 12 months for the patient to recover from and be able to return to work.
In the unfortunate event a patient is diagnosed as having a terminal cancer then depending on the policy it may either continue to pay the monthly benefit or may pay a “terminal illness benefit” if life expectancy is less than 12 months.
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