Self Employed Q and A – Are My Dividends Covered?

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Concern:

I secured an Income Protection Policy 6 years back when I was self employed. I have actually just recently been suggested by my accountant to alter to a Limited Company. I currently get a reduced income with added income originating from dividends which is tax efficient, but would my Income Protection Policy still pay-out based upon my reduced salary?

Response:

I think that you have a Permanent Health Insurance Policy (PHI). This is developed to pay you an income in case you could not work as a result of mishap or ill heath. The income is paid after a pre-agreed waiting period, typically 3 or 6 months, as well as will certainly proceed until such time as you are in shape sufficient to go back to work, you pass away or the expiry of the plan.

This is just one of minority insurance coverages which you can be over insured for. The maximum cover is typically 50% to 60% of your income (differs from company to company). Presumably, this is a big decrease in income if you do need to claim however there are two factors for this. The very first is that the income is currently free of tax, so based on your earnings (after tax) the decline is not quite as terrific. The second is that the insurance provider do not desire you to be financially better off by not working; they want you to have a motivation to go back to function, if wellness enables.

When you requested the policy, the service provider would certainly have inquired about your income (internet earnings) so they might finance you financially. In other words, is the cover you are applying for ideal? They likewise would have requested for details of your task as well as any kind of unsafe searches which might impact their choice to offer cover.

In connection with dividends, some firms will accept them as an income others will not. Likewise if your job has transformed you might have to inform the insurance company and this may affect their capacity to continue to cover you. I would recommend that you contact the insurance company and even check the plan file to see if they will certainly take dividend income into factor to consider. If not, there are business out there that will, however this will imply applying for a brand-new policy and also you might locate that the cost is higher, nevertheless, a minimum of you then recognize that it will certainly pay if required.

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