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Permanent health insurance policies (PHI), and Accident, sickness and Unemployment policies (ASU) are both designed to replace a person's income should they become incapacitated and therefore be unable to work. There are several differences between the two plans, which should be noted.


Permanent health insurance (PHI) or Income Replacement policies are designed to provide the policyholder with a replacement income in the event of a long-term sickness or disability. Payments are usually made when the policyholder cannot undertake their own job due to illness or injury.


Accident, Sickness and Unemployment (ASU) policies will also protect a person's income against illness or injury. However, the main point of difference is that it will also protect a person's income if they were made redundant by their employer. Some ASU policies will also allow you to choose whether you want to receive benefits for accident and sickness only, unemployment only or all three.


PHI will pay out a guaranteed level of income every month for as long as your incapacity continues; if necessary until the day you hit 65 and officially retire. Normally, there is a maximum benefit payable from such a policy. This is usually 65% of a person's annual income, less any benefits that they are entitled to from their employer and the state.


ASU benefits are usually payable for a maximum of 12 months. However, some will pay the benefit for up to twice this, it all depends on the insurer. With ASU you are able to choose the amount of benefit you would like to receive within certain limits for the maximum amount. The premium will be calculated as a percentage of the amount of monthly benefit you would like to receive and hence the higher the amount of cover you would like the higher the associated pemium costs.


PHI policies can never be cancelled by the insurer and most will allow you to make as many claims as you require, so long as the circumstances are legitimate. Depending on the premium that you're prepared to pay, the monthly payments can be linked to the Retail Prices Index (RPI). This means that they automatically keep pace with the cost of living a process known as 'inflation proofing'.


ASU policies will only allow a singular claim at which point the policy will be cancelled, meaning you need to re-apply to set up a new policy. You do not have the option of 'inflation proofing' such a policy. The benefit, once chosen, is fixed and if you wish to increase it then you must apply again for a new policy with a new benefit.


Beauwater is based in Cambridge and offers whole of market service that is truly independent offering the best advice in the UK to find which insurance policy fits your financial shortfall should the need arise. Our advisors will compare the whole of the income protection UK providers and find you the best income protection product to suit your needs.


Registered Address: 1st Floor, 351-353 Newmarket Road, Cambridge, CB5 8JG     The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK

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