Income Protection

Income Protection

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Does anyone have any experience of the situation where someone is claiming on a PHI policy and is legitimately running a very small business? We have an insurance company that is quite happy to deduct the profits of the small business from the maximum benefit payable under the policy for years 1 to 6 but is refusing to allow credit for a loss made in year 7 against other income (a pension) in calculating maximum benefit. Do all insurance companies work to the same rules?
Mark William Ainley

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By frauke
28th Feb 2006 21:12

Losses and IP
A long time ago (about 20years ago) I remember discussing with a underwriter different examples of what insurance companys take into account and the ways they try to be fair over amount they have to pay.

One of the things he mentioned that although they will still pay out if the claiment is able to work in another employement earning less, with the insurance company making up the difference - the only time they would not is for someone self-employed with losses. This is because they felt the payment was not made to subsisdise the running of a business, which they would be if they look losses into account.

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By MarkAinley
01st Mar 2006 11:27

Losses and IP
Thank you for your useful comment Frauke. I can understand why the underwriter would have felt that way. It still seems incongruous to me that the insurance company will reduce benefit for profits but ignore losses when over the whole period of benefit those profits may well exceed losses by a great margin. It certainly does not encourage claimants to try to mitigate the insurance company's liability for benefit and as I said to my client, from a financial standpoint he may well have been better not attempting the self employment. Maybe the insurance company could allow losses provided they did not exceed previous income - but I won't hold my breath.

Thanks again.

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