The minimum benefit guarantee – a safety net for income protection plans
News article
Publication date:
08 April 2020
Last updated:
25 February 2025
Author(s):
Adam Higgs
Minimum benefit guarantees may provide a safety net for those with reduced income and in this insight, we explore some of the key differences in how insurers offer this benefit.
Changes in working patterns is causing greater fluctuations in individuals’ income during their careers. Workers are increasingly making career moves or switching to part-time roles as they grow older, which could see their income level fall. As well as changing working patterns many people, and particularly self-employed clients, may be working less hours or earning less as COVID-19 and self isolation takes its toll. These reductions in income can put workers and their families at risk as they will likely reduce the benefits payable under their Income Protection plans. Minimum benefit guarantees may provide a safety net for those with reduced income and in this insight, we explore some of the key differences in how insurers offer this benefit.
For most plans, the benefit amount paid is financially underwritten at point of claim whereby the insurer will ask the client to provide evidence of their earnings and an assessment will be made on the level of benefit provided. If at such a time the client is earning less than they did at point of application, then the benefit amount will be reduced accordingly. A minimum benefit guarantee essentially provides a minimum benefit that will be paid to the client if they are working a set number of hours at point of claim, but their income is less than what it was at the outset of the policy.
The Exeter’s minimum benefit guarantee is provided at an additional cost. This enables clients to fix their benefit to a chosen level, up to a maximum of £1,000 per month. Clients will need to provide evidence that for the three months before claim, they were working 30+ hours per week and earning at least national minimum wage. This benefit can be paid for a maximum of 2 years.
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This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.
