What are your insurance options for long term health conditions?

According to the ONS, the number of people being diagnosed with a long-term illness is on a steep climb. Between June and August 2022, around 2.5 million people reported long-term illness as their main reason for economic inactivity, up from around 2 million in 2019.

As the cost-of-living crisis continues to unfold, and with NHS wait times (from referral to treatment) having doubled from seven weeks to 14 weeks, we are facing increasingly challenging times. It is therefore a sensible time to consider whether you would be able to cover living costs if you were unexpectedly unable to work.

Income protection

As the name suggests, income protection insurance is designed to help you safeguard your salary in the event that you cannot work and ensure you continue to receive a regular income. There are a variety of policies available, including:

1. Accident, sickness and unemployment (ASU): a short-term income protection policy that replaces your income should you be unable to work due to accident, sickness or involuntary redundancy. The policy pays you a tax-free monthly amount, usually up to 50% of your income, for a pre-defined period.
2. Payment Protection Insurance (PPI): a policy designed to help you keep up with a specific loan or credit repayment for a short period if you’re unable to work. Most people use PPI to cover financial commitments like credit card payments or loan repayments.
3. Mortgage Payment Protection Insurance: this insurance covers the cost of your monthly mortgage repayments if you fall ill or lose your job. You can typically decide how much you’d like your policy to pay out every month, but there are usually upper limits in place that depend on your current salary and employment status – roughly £1,500 to £2,000 a month.

Short term vs long term cover

Most income protection insurance policies are short-term. This means they will pay out for a set period, usually up to two years, while you get back on your feet.

In contrast, there are long-term protection policies available that can provide a regular, tax-free income if you are unable to work for a longer period. Unlike critical illness cover, which pays out a lump sum if you are diagnosed with a specific illness, long-term income protection insurance pays out a regular income for a set period if you’re deemed too ill to work, regardless of the condition. Most long-term policies have a minimum term of five years and will go on until you reach 67 or your planned retirement age. 

Private medical cover

Using private treatment without insurance – especially for serious, long-term conditions – can be very expensive. But with the 14-week waiting list on the NHS, private treatment is becoming a more attractive option to many people, particularly those waiting for a diagnosis.

With this in mind, another insurance option worth considering is private medical cover. Private medical cover pays some or all your medical bills if you are treated privately and gives you a choice in the level of care you get, and how and when it’s provided.

Like all types of insurance, the cover you get will depend on the policy you buy and who you buy it from. The more basic policies typically pick up the costs of most in-patient treatments – such as tests and surgery – and day-care surgery. Some policies extend to out-patient treatments – such as specialists and consultants – and might pay you a small fixed amount for each night you spend in an NHS hospital.

Planning ahead

Insurance will almost always be cheaper if you begin your policy while you are still young and healthy. Premiums rise with age and health conditions, so taking out insurance earlier means you can pay less and be covered for a longer period.

With professional guidance and a bit of forward planning, you can build a protection plan that ensures you, your family or business will be financially protected in the event of misfortune.