Which Income Protection Insurance Is The Best?

Which Income Protection Insurance Is The Best?

If you’ve read any of my articles on Income Protection Insurance, you’ll know by now what it’s all about and who offers it. But with so many insurers out there it can be difficult to determine which insurer is the best. In this article I’m going to be having a more indepth look at the Income Protection policies offered by 3 insurers that I think are the best around. The statistical information within this article is factually correct – whether or not they are the best is simply my professional opinion. Remember that before you take out any kind of insurance policy, I always recommend that you speak to an independent financial advisor. So…

Income Protection Insurance is designed to pay you a monthly amount to cover your wages and allow you to continue to support yourself and your family should you be temporarily unable to work. There are many insurers out there offering Income Protection, but I believe that the top three policies are offered by AIG, Legal & General, and Aviva. Let’s take a look at why:

AIG

AIG operates in over 80 countries and is one of the largest insurers in the UK, dating back to 1919. But size isn’t necessarily everything, and being one of the biggest around doesn’t automatically make you the best. But, in this  case…

How good is their cover?

AIG’s income protection policy offers lots of flexibility, including carer’s cover for parents, plus they’ll waive the deferred period in the event that you are diagnosed with a terminal illness. They are also one of only 4 providers who will cover those who suffer with type 2 diabetes. They offer those with the condition guaranteed premiums, unlike other insurers….also, AIG doesn’t take any benefits you receive into account when assessing your monthly Income Protection payout.

All sounds pretty good so far doesn’t it; but what does everyone else think?

What Is AIG’s Defaqto Rating?

Defaqto is a service that compares financial products  and gives them a star rating based on their features and benefits – with 5 stars being the best. AIG’s YourLife Plan Income Protection is a 5 star rated product, and the insurer’s are no stranger to winning industry awards for their insurance policies either. In 2019 AIG won Outstanding Insurer of the Year at the LifeSearch Awards and in 2018 they won Best New Product for their Income protection at the Protection Review Awards, which just proves their credentials.

That all sounds good so far, but what do AIG have to offer their customers in the way of extras when it comes to Income Protection?

The Extra Bits

AIG has some additional benefits to taking out their Income Protection insurance; I’ve already mentioned that they are one of only a handful of insurers who will cover type 2 diabetes, but what else?

  • Recuperation Benefit – This added extra means that during the deferred period you can access up to three times the amount of your monthly payout to pay towards services such as physiotherapy should you need it.
  • Best Doctors – If you were to be diagnosed with an illness covered by your Income Protection Insurance, and you have been given an ‘opinion’ by an NHS Doctor regarding treatment, AIG will, as part of their policy, contact the ‘Best’ Doctor from around the world who specializes in that illness to get you a second medical ‘opinion’ for FREE! You will then be sent a report which you can take to the NHS and ask them to follow it instead. 
  • Rehabilitation Benefit – This handy little extra will top up your earnings to match your monthly Income Protection benefit should you only be able to return to work at reduced hours or for a lower salary.
  • Over-Insurance Protection – If your income were to fall, and then you were to make a claim against your policy and find that this lower income now means that you are ineligible for your full benefit, AIG will offer you a refund in the form of a premium holiday when you return to work.
  • Carer’s Protection – AIG will pay benefits for 6 months if you have to leave work in order to give your dependent child full-time care because they have suffered an illness or injury.

Now that’s A LOT of extras by anyone’s standards, but how to AIG measure up when it comes to paying out on their Income Protection policies?…

Payout Statistics

Recent data published by AIG reveals that 93% of Income Protection claims were paid out in 2018. Of those claims not paid out, the vast majority of those were down to non-disclosure; where a customer hadn’t been 100% truthful on their claim.

Legal & General

Legal & General is another insurer that offers one of the best Income Protection Insurance policies around. They’ve been around for nearly 200 years and are the UK’s largest insurance providers…let’s see what they have to offer:

How Good Is Their Cover?

Legal & General’s Income Protection Insurance is one of the most comprehensive policies around, particularly for those in low-risk jobs and higher earners, as they have a maximum benefit cover of up to £200,000 per year. Also, like AIG, they offer a second medical opinion service should you need it and will donate up to £300 to cover your consultation. Sounds good, but what about those all-important defaqto ratings?

What Is Legal & General’s Defaqto Rating?

It is of course 5 stars, and won the title of Best Income Protection provider at the Cover Excellence Awards in 2012 and 2015. They have continued to be one of the top three rated providers ever since, including in 2020.

And what about those extras? Of course Legal & General have lots of incentives on offer that have kept them consistently in the the top three for so many years, such as:

  • Hospitalisation Benefit – Legal & General will pay up to £150 a night, for a maximum of 13 weeks if you are hospitalised. This benefit is payable until the end of the deferred period or until you leave the hospital – whichever is sooner.
  • Continuous Cover – This little extra means that your Income Protection cover will continue even if you become unemployed or go on maternity/paternity leave.
  • Linked Claims – if you return to work after making a claim and are then incapacaitated again for the same reason within 12 months, the deferred period will be waived and you can resume receiving monthly payments.
  • Proportionate Benefit – If after having to make a claim you return to work but at a lower salary or to a different job as a result of the illness or injury you suffered then you will be paid a reduced monthly benefit.

And how do Legal & General compare when it comes to paying out on their Income Protection Policies…pretty well you would think….

Payout Statistics

And you’d be right: Legal & General have paid out on 95% of Income Protection Insurance claims in the last few years, with the other 5% not being paid out due to non disclosure on forms, where customers haven’t been completely honest about their claim or lifestyle.

All sounds good so far, and you’re probably already feeling spoilt for choice, but, in the words of Yoda, ‘There is another…’

Aviva

Another one of the ‘big three’ is Aviva, and is the largest insurance group in the UK. Created by a merger of Norwich Union and CGU plc, Aviva can trace its history back to 1696 and serves 44.5 million customers in 28 countries worldwide. So let’s take a look at what sort of cover they have to offer:

How Good Is Their Cover?

Aviva’s Income Protection is, again, one of the most comprehensive in terms of cover, and any payouts you receive when you make a claim are not affected by any employment support allowance you might receive. If your incapacity ends halfway through a month, Aviva will pay a daily benefit amount to cover the period, and, like Legal & General, if you have to claim twice for the same medical condition within 12 months, Aviva will start paying the monthly benefit straight away – without you having wait until the end of the deferred period. And their defaqto rating? Don’t pretend you haven’t already guessed..

 What Is Aviva’s Defaqto Rating?

It is of course 5 stars, and the fact that they’re award-winning insurers won’t come as any surprise to you either. Aviva were finalists in every single category at the 2019 Insurer Excellence Awards, and were crowned ‘Best of the Best’ insurers overall.

But of course, you know by now that none of these insurers have made it into my top three by being ‘basic’….so how about those extras:

Aviva’s Extras

  • Support Plus – This gives you access to BUPA Healthline and the Best Doctors App, as well as to counselling and carer support.
  • Fracture Cover – Your Income Protection policy with Aviva will pay up to £6,000 if you were to suffer from a specified fracture, and all for just an extra £4 a month.
  • Global Treatment – Again, for an extra £4 a month on top of your premiums, Aviva will pay for overseas treatment worth up to £1m for certain illnesses such as cancer.
  • Trauma Benefit – With this extra, Aviva will pay up to £40,000 (6 times the monthly benefit) if you were to suffer from one of six listed traumas, including blindness or loss of a hand or foot.

But how does Aviva measure up when it comes to their claims statistics? How likely are they to pay out on your Income Protection Insurance?

Aviva Claim Statistics

Aviva paid out in 88.8% of Income Protection claims in 2018, and while this is marginally lower than Legal & General and AIG, those claims that were not paid out were, as with the other insurers, down to customers not being forthright on their applications or claims forms.

And so there you have it; what I believe to be three of the best Income Protection providers around. Of course there are other insurers out there, and I would always recommend that whatever type of policy you want to purchase, you should seek the advice of a financial advisor first.

If you have any insurance-related questions, Critical Illness cover or otherwise, please do get in touch. Our advice is free, and one of our qualified advisors would be more than happy to help.

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Sam

Sam

I’m More Than Money’s Income Protection and Business Protection Insurance expert, I started my career in finance 8 years ago. I’ve gone from advising on insurance in my home county of Kent, to working in the big city of London. I started More Than Money with my Dad and Brother, to get away from the 'sales environment'. When you're a qualified Adviser, the quality of your advice has to come first, not a 'sale on the board'. I thought, if I cant find that environment elsewhere, well i'll create it myself.

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