Q. "Permanent Health Insurance". "Critical Illness Insurance". "Hospital Cash Plans" ..... teachers don't need to bother about these do they?
A. They certainly do, especially early on in their careers.

Q. But don't they have contractual sick pay and breakdown pensions?
A. Yes - but would these arrangements be enough to make up for the loss of income to you and your family if you were seriously ill? After five years of service you would be entitled to six months sick leave on full salary, then up to six months on half salary plus state invalidity benefits: in your first year this would only be one month and one month. And what if you were unfit to go back to work?

Q. I've never really thought about it - I believe there are incapacity pension arrangements.
A. There are, and a teacher not able to return to work at the end of a period of sick leave would usually apply. There is a separate SSTA leaflet giving fuller details, but for now the important point to note is that the amount of the lump sum and pension depend very largely on the service the teacher already has. Even with pension and state invalidity benefits a younger teacher's disposable income could be down to 50% or less of what it had been.

Q. Is this where Permanent Health Insurance comes in?
A. Yes. A PHI policy can pay up to the difference between what the teacher is getting when sick and 75% of earnings when working, depending on the level of cover chosen and premium paid.

Q. But I wouldn't need this straight away if I get full pay for a period. Does this not mean wasting premiums?
A. You can "defer" the payment of benefits from PHI policy for as long as a year, or as little as a week, and premiums are adjusted accordingly. The policy the SSTA has arranged with Tunbridge Wells Equitable Friendly Society has a normal deferment of one year. Younger teachers may however adjust this for the first few years.

Q. I could pay these premiums for years and never need to claim. This would seem a considerable waste of money.
A. It is questionable whether prudent insurance is ever a waste of money but in this case you can also be reassured that there can be a return on your money.

It is possible to arrange a policy which will provide a lump sum return whether or not a claim has been made under the terms of the policy. This is one of the essential features of the TWEFS scheme referred to earlier.

Q. What about this "critical illness" insurance? What is that and is it worth considering?
A. A critical illness policy is more like life assurance but instead of paying out on death, or on maturity at an arranged date, there is a sum assured which is paid out if the insured suffers from one of a range of "critical illnesses".

Q. When does it pay out?
A. The range of diseases and events is given fully in the various companies' literature and may vary slightly from one to another but it will normally cover such events as heart attacks and strokes, life-threatening forms of cancer, and permanent disability.

Q. What if I had a heart attack and later went back to work?
A. The sum assured would be paid out. Similarly if a qualifying disease were diagnosed the sum assured would be paid out while you were still in fully paid employment. Alternatively it would become payable on becoming disabled and incapable of continuing employment, or on death if earlier.

Q. So this is really different cover from permanent health insurance?
A. Yes, and some combination of the two could well be worth considering since they are designed to meet potentially different circumstances. Critical Health Insurance is designed to provide a cash sum at a time in your life when you may most need it to cope with enforced changes in lifestyle of you or your family. Permanent health insurance is designed to help maintain a reasonable level of income if you are ill for a long time for whatever reason.

Q. Can you recommend a good policy?
A. Whilst this is relatively new form of cover, there are now more than thirty Life Assurance companies offering Critical Illness products. It is imperative that you seek independent advice to ensure that the correct contract is selected to suit your personal circumstances.

Q. The other policy someone suggested was a hospital cash plan. How does that work?
A. It's very straightforward. You pay monthly premiums for a policy which will pay out an agreed amount of cash for any day you have to stay in hospital through disease or accident.

Q. What if I don't approve of private medicine? Is this different?
A. It has nothing to do with private medicine. It is simply a policy to pay cash to compensate you for any extra costs e.g. transport costs for the family, or simply for the unpleasantness or general inconvenience of being in hospital. You can spend the cash in any way you choose.

Q. What about a single person? Since I have no family and no dependants I have never really bothered about things like death benefits. Should I look at these policies?
A. The answer has to be yes. To put it bluntly, you would have no problems if you died of a heart attack or accident, but what if you were disabled or seriously ill? PHI or Critical Illness cover, or a combination may be exactly what you need.

Q. Can you give me illustrations of these various policies?
A. This is a job for the specialist. SSTA members can receive free financial advice, and personal illustrations of these and other insurance policies by contacting: Planned Futures, 89 West Regent Street, GLASGOW, G2 2BA. (Tel: 0141-353-6688)

Other related leaflets from SSTA are:

No. 2 Additional Pension Provision

No. 5 Incapacity Retirement

If you have any questions or require clarification on any matter please contact the Association in writing at the address below.

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