What is Income Protection Insurance for Pilots?
Your health as a Pilot is as vital as your Class One Medical Certificate. Overseeing a commercial airliner, as you know requires you to be in great tip-top health. There may be unforeseen circumstances that stop you working, and we have found from our experience with Pilots, that it doesn’t take much for you to not be able to carry out your job from a medical perspective.
Simply defined, an income protection insurance policy for Pilots will pay out if you’re unable to work because of sickness or injury. It’s a type of salary insurance, paying between 55% and 70% of your gross annual salary on a monthly basis.
Claims from Pilots can be:
- A heart attack that has stopped them from working, and resulted in a loss of licence
- Musculoskeletal issues such as joint pain, or chronic back pain
- Mental health disorders
The claims are not limited to the above. We will cover ‘how pilots can claim’ in the next sections.
Longer term income protection is more expensive, but could be the safety net you need, even paying out if you need to claim more than once during the lifetime of the policy. Payments could be used to cover your mortgage, bills, groceries – whatever you need to help you back on the road to recovery.
If you have dependents, income protection could be your family lifeline.
Loss of License Insurance Vs Income Protection Insurance – Which one?
Income protection and Loss of licence insurance are two different types of policies.
Loss of Licence Insurance
A very common type of insurance that most Pilots have heard of is ‘Loss of Licence Insurance’. This is effectively a policy that pays if you suffer an injury or illness during the insured period which results in a long-term unfitness assessment being issued by the licencing issuing authority, equating to the loss of your pilot licence.
We strongly advise that you steer clear of this insurance as there are limitations:
- The pay-out is a single lump sum which is limited, I.E you may get a pay-out of £20,000 on loss of licence. Which is a on average, a fifth of Pilots salary. This certainly Is not enough.
- You must lose your licence, but we know, from speaking to our existing clients that are Pilots, you may be signed off work for reasons that may not result in a loss of licence, IE mental health issues, or back pain.
- The policies end on payment of benefit, once you are paid out, the policy ends
- Cover renews each year, meaning that the insurer has control over your premiums, and the terms of your policy
Income Protection Insurance
In comparison to Income Protection Insurance, this pays an income for any reason that stops you doing your own job. We strongly suggest you take out one of these policies over loss of licence insurance for the following reasons:
- You are paid a tax-free income for however long you need a pay-out – this can be all the way until your selected retirement age
- You do not need to lose your licence to claim, if a doctor signs you off and you cannot work, you are paid out
- You can make as many claims as you want, the policy does not cease after you claim, it simply continues with the same conditions as policy inception
- The cover does not renew each year. The terms are set from day one for the lifetime of the policy.
Why take out Income Protection Insurance?
It’s never a nice thought to be off work, for whatever reason, but with little or no provisions, income protection insurance will come in handy. The numbers really back up the need for Income Protection Insurance:
It is believed that one in four pilots suffer from motion sickness at some point during their career. According to the Office for national statistics (2017-2018), the average household spend is; £572.60 per week. The For the same financial year, the ONS calculated an average household income of £2,366 per month (£591 per week). In line with low levels of household savings, and statutory sick pay of £94.25 per week, those without any provisions for loss of earnings insurance will be left struggling very quickly. We are here to help!
According to the Association of British Insurers in 2018:
- The number of claims paid surpassed 25,000 for the first time ever
- Average Income Protection insurance pay-outs reached £22,000, the highest average on record
- Pay-outs equal to £1.7 million paid every single day
Do I need Pilot Income Protection Insurance?
Are you self-employed Pilot? Or Even an employed with little or no sick pay? Then Income protection is for you.
Income Protection insurance for self-employed Pilots and Employed Pilots:
Let’s assume you are the sole income provider in the household and would not be able to pay the bills if you were unable to work. As the sole source of income, choosing income protection insurance is the best way to protect yourself and your family financially. It would ensure that you would be able to pay your bills if you were ill or injured. Find the best policy for you, to ensure you can pay the bills and monthly outgoings if you suffered an accident or sickness that meant you could not work.
Again, let’s assume you’re the sole income provider and your employer offers sick pay. Obviously, we’d advise you to check what level of sick pay you would get from your employer before making a final decision about income protection insurance. All things considered, few companies offer long term sick pay beyond Statutory Sick Pay, so it is important to have all the information in advance. If you do have a limited level of generous sick pay, income protection insurance may still be essential in line with your long-term commitments.
Tips on taking out a Pilot Income Protection insurance policy.
Get the Incapacity Definitions for Pilots right:
Own occupation: policies cover policy holders who become unable to do their own current job that they have previously been performing and are trained to do. In simple terms, you will be able to claim on the policy if your illness or injury prevents you from carrying out your ‘own specific job’.
Example of how Own Occupation for Pilots: You are a pilot. You have been to doubt trained for most of your career to become a fully-fledged Pilot. Unfortunately, you break your arm, meaning this restricts your ability to carry out your job in the cockpit. The insurers will assess your claim in line with the usual tasks of a Pilot and if you cannot work as a Pilot, that will be one criterion that will help your eligibility to claim.
There are other types of policies that do not follow this approach that we would highly recommend steering clear from:
Suited occupation: A suited occupation insurance policy covers policy holders who become unable to do their own job or a similar one that may be deemed by an insurer to be suitable based on their qualifications, skills and expertise. This may not be as simple as it sounds.
Example of how Suited Occupation cover works: Again, your job has not changed, and you are still a Pilot. Your expertise may range from being a fully-fledged pilot, creating a flight plan, considering aircraft performance, and weather conditions. You’ve broken your arm and you cannot work. Based on suited occupation, the insurers believe you can go and do another job based on your skills and expertise at a local flight simulator helping trainee Pilots book in simulators, earning minimum wage. As you can already tell this is very far from ideal.
Activity of Daily Living: A policy like this works on a stricter definition than the above two. With a policy like this, your claim will be assessed in line with routine activities people do every day without assistance. You can only make a claim if you cannot carry out the ADL. For example; eating, bathing, getting dressed, toileting.
Making sure the type of premium is right for you:
Below are the different types of premiums that can be offered to you by an insurance provider:
- Reviewable: as it sounds, premiums that are reviewed regularly and which could be increased and decreased as per your needs. These tend to start off lower, and the insurer has the power to increase the premium at the premium review. The premium review depends on the insurer and how often they review their premiums, for example; this can be once a year.
- Age Banded: premiums that are increased by a fixed or reviewable percentage as you get older. Again, these premiums start off lower, and as you get older, they increase in line with your age.
- Guaranteed: premiums which remain the same. From the outset, these may be slightly higher in price when compared to Reviewable / Age banded premiums, but rest assured these premiums remain fixed over the lifetime of the policy providing no changes are made to the policy.
Understanding how Pilots can claim on an Income Protection Policy
If you’ve taken out a policy via Black Lion Insurance, you already know that you have the best cover for your needs. As the name implies, it’s there to protect you.
Step one: Let’s get started. You will need an official diagnosis of your condition from your doctor with which to take medical leave, if you have a job (rather than self-employed). Then, we will your insurance provider.
Step two: Once fully presented with all the information they need, they will inform you when payments will start, normally after your agreed deferred period – see below. Bear in mind that you’ll need to keep paying your premiums until the end of this period.
Step three: And now, focus on getting better. The money will be paid monthly, tax-free.
If you have a long-term policy, the good news is that you will continue to receive monthly payments until you retire or until the end of the policy. With a short-term policy, payments will cease at the end of the policy period.
Other important Considerations for Income Protection Insurance:
Waiver of Premium is optional with most income protection insurance policies. Think of it as its own small insurance policy. If your IP policy includes a waiver of premium, the insurance provider will not require you to pay your monthly premium to maintain the policy if you are claiming.
Indexation is also optional. From the outset, your monthly income benefit is adjusted to keep up with inflationary increases. If the cost of living increases, then your policy payments go up respectively.
Speak to us!
Compare the Top UK Income Protection Insurance Providers for Pilots
Here’s a guide to the Black Lion income protection insurance partners. We feel that they represent the best of the best.
We’re whole of market, holistic advisers with access to the best products, and importantly, the unbiased knowledge that you need.
Come to us for advice on the following:
Founded in 1831 as Scottish Equitable, and with their headquarters still in Edinburgh, Aegon won the Cover Excellence award for Best Service Provider in 2016.
Maximum cover: 55% of gross earnings
2016 pay-out rate: 85%
AIG were founded in 2008 as Aegas Protect and were acquired by American International Group Inc. in 2014. In 2016, they won the Paradigm Lender and Provider award for “Best Income Protection Provider, 2016”.
Maximum cover: Up to 60% of gross earnings
Founded as Norwich Union in 1797, this long-established insurance provider merged with CGU plc in 2000 to become Aviva. It is the largest insurance group in the UK. Aviva won the “Best Customer Service” award for the second year running in 2017.
Maximum cover: 55% of gross earnings
2016 pay-out rate: 92.6%
Legal & General was founded in London in 1836 in Chancery Lane. This major insurer won the Cover Customer Care Award for Best Claims Management in 2017.
Maximum cover: 60% of gross earnings up to £60,000 and 50% of additional earnings
2016 pay-out rate: 94.4%
Own Occupation/Activities of Daily Living
Founded in 1843 as a burial society, LV is the number one provider of income protection insurance in the UK. It has over 1 million members and 5.8 million customers. LV won the Moneyfacts award and Cover Excellence award in 2017 for “Best Income Protection”
Maximum cover: 60% of gross earnings
2016 pay-out rate: 90%
Royal London mutual society was established in 1861, originally as a friendly society. It was named company of the year for two years running in the FT Adviser Online Innovation and Service awards.
Maximum cover: 65% of gross earnings up to £15,000 and 55% of additional earnings
2016 payout rate: 95.6%
A newcomer to the market in 2007, Vitality received a 5-star Defaqto rating in 2017. Indeed, Vitality had received this award for the previous 8 years in a row.
Maximum cover: 60% of gross earnings up to £30,000 and 50% of additional earnings.
2016 pay-out rate: 94%
Guaranteed /Reviewable premiums
Own Occupation/Activities of Daily Living/Special Incapacity Definition
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We are a dedicated team of financial advisers, with years of experience in guiding our clients to a solution that meets their specific needs. We specialise in helping both employed and self employed individuals, as well as business owners on a variety of solutions, which range from life insurance, income protection insurance, keyman insurance and shareholder protection insurance.
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