Majority of the financial experts all over the world agree that safeguarding your earning ability needs to be the priority. According to David Reed, director at Oscar Winson, the purpose behind income protection insurance plans is to offer expats with regular income in the scenario that normal income is lost owing to disability or illness.
With the income protection insurance, you get a certain percentage of the annual income earned. Typically, this would be 50 to 65 percent of the employment income. It is important to remember that amounts could vary depending on the insurance company you select. The existing legislation, payments are made without deducting personal income tax.
The extent of income that can be replaced using insurance is typically calculated with the after-tax income lost by the expat. From this, the local state benefit is deducted (to which the expat is eligible). The final income amount is then given to the expat on a monthly basis and is tax-free.
A person living outside the United Kingdom has reduced eligibility as far as state benefits are concerned. Therefore, the payment assessment’s second level might have minimal impact on the expat income insurance claims.
David Reed explains that for those who are self-employed, the employment income equals the trading revenue for the previous tax year. On the other hand, for those who are employed, the insurable income will be the annual salary and the benefits received in kind.
For expats serving at higher company positions, such as directors, the company would release the plan, insuring a part of the dividend payments, in the event that they are paid regularly and pension contributions by the company.
Income protection insurance schemes could also be developed with reviewable premiums or guaranteed premiums. Financial advisory firm, Oscar Winson says that in case of guaranteed monthly premium, there will be no increase in the amount during the plan period, irrespective of any insurance income claims that have been made by the expat.
On the other hand, reviewable premiums are generally reviewed by an insurance firm after every five years. These get reviewed based on the claims UK market experience, not on the claims made by the expat.
Income protection insurance plans are formulated for a specific number of years that can be chosen when the application is made. Typically, a plan is set up for running till the estimated retirement date of the expat. However, short periods could also be selected depending on individual circumstances.Learn More