The personal details of the individual applying for the insurance policy will affect the underwriting process. The policyholder’s age, lifestyle, medical history and occupation will affect the premiums calculated by the Life Office.

A deferred period is an initial waiting period that must elapse during a claim before the benefit is payable to the policyholder. Usually a deferred period of 4, 8 or 13 weeks is selected, depending on the individual’s emergency/contingency fund, however it can be longer. Inclusion of a deferred period will reduce the premium required to purchase the desired level of cover. 

It is only possible to secure a monthly benefit of 50%-75% of the individual’s earnings for the previous year. This is due to the moral hazard that could arise by paying an individual the equal level of income whether they work or not. By setting this level it incentivises claimants to return to work if possible.

The policyholder may select a specific date for when the cover expires. This may be, for example, the maturity date of their mortgage or perhaps their 65th birthday (usually retirement age). If a claim against the policy is made the monthly benefit will be paid until the maturity of the policy or for a specific number of years.

The premiums calculated will take into consideration the term of the policy and the increased likelihood of a payment of benefits increases as the policyholder grows older.

There are a number of definitions that Life Offices use to measure incapacity and these are usually measured by ability to complete daily tasks with their Occupation and a number of daily living activities.

• Own Occupation – Unable to perform their current occupation. This is the highest level of cover achievable.
• Suited Occupation – Totally unable to undertake any occupation to which they are suited by reason of training, education or experience.
• Any Occupation – Totally unable to perform any occupational task. This is the lowest form of protection.