Though it is not really life insurance, permanent health insurance is issued by many life insurance companies and is, unlike fire or accident insurance, a long-term contract.
In return for an annual premium the company guarantees to pay a specified annual income to the policyholder if he or she is unable to work as a result of illness or disablement.
The contract runs to retirement age, normally 65 for men and 60 for women, though if earlier retirement is intended the term may be shortened. Since the policies provide no life insurance benefits, no tax relief is allowed on the premiums.
A number of basic conditions are stipulated by all the offices issuing permanent health insurance (PHI) policies. The maximum proportion of earnings that may be insured as an annual benefit is usually about three-quarters.
Some illnesses (particularly those resulting from excessive use of alcohol or drugs) are excluded.
If the policyholder is able to work only at a different, less well-paid, occupation, only a proportion of the annual benefit will be payable.
Premium rates relate not only to age and health (with great attention being paid to medical history, especially if the policy is substantial) but also to occupation, some high-risk occupations being subject to a heavy extra premium.
The premium is also determined by the period of illness that has to elapse before the benefit becomes payable. This "deferred period" may be 4 weeks, 13 weeks, 26 weeks, and even up to 104 weeks, and the premium is obviously much lower for the longer deferment......... see: click here for An Online Guide To Life Insurance - Taxation .
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