Long Term Disability Insurance - This type of insurance is also known as Permanent Health Insurance (PHI), it will pay a monthly amount if you are unable to work because of an illness or a disability. The Permanent Health Insurance Policy will continue to pay you until you recover and go back to work, or until you die or reach the policy termination age which is usually 65. There are usually monetary restrictions on the policy; the most you can insure is usually up to 75%of your gross income, less any state benefit that you may be entitled to. The percentage is reduced for higher rate tax earners to allow for the effects of higher marginal rates of income tax.

Some policies use a with-profits or unit-linked investment base, allowing a cash return on retirement. Some insurers will build in protection to guard against inflation with the payments increasing each year in line with an Index.  Sometimes and if you are lucky enough, your employer may offer this type of cover as part of your salary package, if they do, check the terms and conditions of the policy, the cover may be “basic” with quite a few restrictions or maybe with a high excess, usually expressed in weeks not insured, it may be worth taking out your own cover.  Remember, if you are self-employed, you may want cover to start as soon as you fall ill.  The terms of the policy will depend on how much cover you actually want, on your sex (women pay more) and on how long you are willing to wait between being unable to work and receiving some payment (deferred or waiting period, excess).

The longer you are prepared to wait for the policy to start paying out, the less you are likely to pay for the policy. Your job also influences how much you will have to pay, with white-collar workers generally paying less. Your health and medical history will also affect the premiums required by the insurance company.  In some cases, it may not be enough that you can no longer carry out your own job, you may have to prove that you can not do any job at all. If you are able to work but perhaps not to the previous extent of your ability, you should still receive a payout but in a reduce proportion.