Income protection insurance is meant to protect customers by providing a tax-free income in the event that you are unable to work (because you have suffered an injury/illness). On paper, it therefore seems like a great way to protect your income in the event of any unfortunate, unforeseen circumstances in the future. The problem lies in the fact that many who have taken out this income insurance, and then find themselves unable to work, have found it virtually impossible to then make a claim.
One of the main reasons which make it so hard to successfully claim with this type of insurance is the method in which insurers assess policyholder’s ability to work. Those that took out this type of insurance on a ‘work-task’ basis means that before they will be able to make a claim, they will need to perform a series of tasks, to demonstrate to the insurance company that they really are unable to work.
The types of tasks insurance companies ask their policyholders to perform can involve using a pen/keyboard with either of their hands or with an aid, walking 200 metres on a level surface with an aid without stopping or suffering pain, or having sufficient eyesight (with aids) to read 16 point print. Many have criticised these tests, as only those are severely incapacitated would struggle to pass them. Additionally, these tests do not take into consideration an individual’s mental health, and whether they are emotionally and psychologically fit to work.
Situations therefore arise where individuals who are suffering from psychological illness/stress are unable to work, and deemed so by their GPs, and yet are unable to claim on their income insurance policies as they are still able to perform the basic, technical tasks these policies lay down. Many critics have claimed that these basic tasks should be abolished, in favour of more realistic indicators of a person’s health. Furthermore, it should be highlighted that physical and psychological illness are two very different types of health concerns, and should not just be lumped together using a test for both. Psychological illness requires a much more delicate, emotionally focused type of testing, and the nature of the tasks asked by insurance companies to policy holders should reflect that.
At the moment, insurance companies may attempt to justify their work task based method by claiming that it prevents a number of fraudulent claims, preventing a misuse of the system. Instead, this seems to be a thin smoke screen by which companies can ensure they pay out only minimal claims to the few that cannot pass the basic tests. For those policyholders that have been regularly paying their premiums in an attempt to be risk averse and secure their futures, this seems like a kick in the teeth when they are prevented from claiming because they can pass a test which requires them to read 16 point writing.
It is therefore advisable that people with income protection insurance review their policies to find out on what grounds they can make a claim should they need to. If they discover that their policies are on a work-task basis, they should consider switching policies where they will be getting a fairer policy for their money.