aviva income protection

Psychological illness features high in 2020 income protection payouts

26 Mar 2021 Life & Pensions

In her recent Money Times article in The Meath Chronicle, journalist Jill Kerby, discussed the increase in claims paid out by Aviva in 2020 for psychological issues.

As someone who has worked from home for nearly my entire career – and with no young children to homeschool – the lockdowns of 2020-21 haven’t impacted on my working routine one way or another. I still just walk down the steps from my bedroom into my office; I have no traffic to contend with, no missed buses on a wet morning, no office companions to miss: my faithful little spaniel curls up on the sofa behind my chair until it is time for another walk.

Writers, even freelance journalists are solitary creates for the most part and I am very very lucky to both be accustomed to my own company and to be of an age not to have any financial worries (other than how my pension fund might be impacted by the endless manipulation of money markets).

As this pandemic continues, however, the Irish mental health services have never been busier as the rest of the working population, and the newly unemployed – too often struggle to come to grips with the upending of their working lives, and for many, their careers.
Working from home is a tough gig if you have limited living space in a small or crowded apartment, and that pressure is only heightened if you have children being homeschooled, or an infant that isn’t enjoying the company or care of its wider family, or even the professional creche or playschool.

As a homeworking freelance journalist my biggest concern wasn’t just about achieving a steady income, but who would pay me if I fell ill or was injured and couldn’t work. Luckily (again) the firm of women accountants who took me on as a client back in 1987 when I started my solo career, they insisted that I take out a personal pension and a few years later – when I had a steady income – a modest tax deductible (up to 40%) permanent health insurance or PHI policy, now more appropriately known as an Income Protection Insurance.

I kept topping up my cover as my income grew, and while, thankfully, I never had to make a claim, it provided extra peace of mind that whatever happened at least 75% of my income wouldn’t completely disappear.

Jump forward to 2020-21 and we have seen high rates of mental health problems being reported with the latest evidence supplied by one of the leading providers of income protection cover, Aviva Life & Pensions.

According to Aviva, out of the €45million it paid out in 2020 to 2,000 new and existing income protection claimants, psychological issues are the single greatest cause for claims at 25%, having surpassed orthopaedic issues which are down 7% but which held the number one slot for many years.

Nearly 60% of new claimants in 2020 were female and 41% male, and their average age was 48 years. (Some 21% of those who made claims in 2020 suffered some form of cancer(+5%), while 9% recorded neurological issues (+2%). The number of claimants with cardiac issues also increased by 3% last year to 6%. 56% of first time claimants were under 50.)

The impact of not being able to work due to illness or injury for a period of time can have a devastating financial consequence for families,  particularly those who have significant outgoings each month and little to fall back on in terms of savings. Unfortunately, we continue to see claims from customers in younger groups. Richard Jones, Aviva’s Head of Product

The average claim lasts five years, he said, and the average benefit payout is €3000 per month, but “a significant number are likely to remain as claimants who to retirement age.”

As far back as last September the Aviva researchers had a pretty good idea that people’s mental health was under serious pressure.

“The study showed the enormous toll that [the pandemic] was taking as anxiety levels had almost doubled since March 2020 with 3 in 5 people (42%) admitting at that time to suffering from anxiety (pre-Covid-19: 24%) and stress (pre-Covid-19: 25%),” Jones explained.
While 35% of people said they would survive on the State Disability payment of €203 per week if they couldn’t work for a period due to mental health or another illness, “only 17% of those surveyed had sufficient savings for one year”.

Fewer than half of private companies in Ireland offer occupational pensions and perhaps the accompanying income protection cover. The rate of cover for the self-employed is even lower, though this product can be purchased separately to a private pension.

The cost of income protection is risk based, so depends on your age, employment, and whether you have a pre-existing health condition. Someone who works in construction or the trades will pay more than an office worker.

Unemployment may be the greatest and most obvious scourge of the pandemic, but thousands of others are still experiencing great financial loss due to serious medical conditions. As this claim report shows, the psychological impact of the pandemic is only adding to the burden.

Income Protection: How much does it cost

There are four ‘Occupational Classes’ for determining the cost of Income Protection Insurance.
Occupational Class 1
Professional, managerial occupations, administration, clerical

Occupational Class 2
Occupations involving occasional manual work

Occupational Class 3
Skilled non-manual and manual occupations

Occupational Class 4
Partly skilled and unskilled manual occupations

Example:

Male/Female
Age 30 years and six months
Non-smoker
Annual income benefit of €50,000 until retirement age of 65 after a deferred period of 26 weeks
Occupational Class 1
Benefits and premium not increasing.

Cost = €61.62 per month (includes 1% Government levy)

The same person working in a Class 2 Occupation would pay €86.47 per month.

For advice on protecting your income should be unable to work due to illness or injury, please contact our trusted advisers on +353 1 7070 000 or email john.finnamore@seasprayfs.ie

Seaspray Financial Services trading as Seaspray Private and Seaspray Mortgages is regulated by the Central Bank of Ireland. Registered in Ireland number 582920.

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