The real relevance of this cover can only be gauged when you hear of a real live case. In fact the case relates to a partnership rather than a limited company but the outcome will be exactly the same:
Many years ago Nicholls Stevens had advised a firm of Chartered Surveyors. Thus firm put in a Group Income Protection Scheme for the partners and staff. The scheme provided for income to be paid after a member had been unable to work for a period of six months because of an illness. The income was 60% of their salary at the date of the claim and was index linked. In the event that the member could not return to work the cover would run to age 65.
There are a number of key features to such a scheme
- Once the Insurance Company has insured you they are responsible for paying any number of legitimate claims, even if it is for the same illness
- If you do not recover sufficiently to return to work the benefit can be paid until retirement age
- The Insure Company will pay a proportionate benefit if you are able to return to work part time
- The insurance company will pay out if you cannot carry on your own job and you are not forced to take on alternative employment.
In this case quite soon after the scheme was in place, one of the partners had a stroke age 45 , he tried to come back to work for a while on a part time basis and the policy paid a proportionate benefit, eventually it was obvious that the work was too stressful and the partner gave up work totally. Today he is 64 and has been drawing an index linked income for over 15 years and although not capable of operating as a Chartered Surveyor he has been sufficiently healthy to enjoy the last 15 years without any pressure to seek alternative employment.
His partners feel no moral obligation because he has a good level of income and they were able to pay out his capital account over a period and quickly replace him with a new partner.
In considering this cover it is also important to remember that the level of state benefit in the event of disability is very poor and partly means tested and will, in most cases, only be paid out if you are unable to carry out any occupation.
Nicholls Stevens are able to design schemes which will pay the benefits to the individual or to the partnership/company. Each case is slightly different and we are able to tailor the solutions to meet the needs of your company or partnership