Self-employed people have been warned they could be in for a rude awakening if they use the wrong earnings when applying for income protection (IP).
The issue could mean they are paying more for a higher value cover which they can then not access.
Tom Salmon, claims manager at Pacific Life Re (pictured), highlighted that self-employed people disclosing their turnover instead of net profit when applying for IP was one of his biggest bugbears.
“That is going to mean you’re going to be given a higher sum assured, but you’re probably never going to be entitled to that following the financial calculation,” Salmon explained on the second day of Income Protection Action Week (IPAW).
“That’s all about education at the application stage.
“That’s not their earnings. We take the expenses and things like that off that, so you could get to a stage where you think you’ve got earnings of £100,000, but actually when it comes to it, your net profit might only be £40,000.
”You’re going to be getting a lot less than the sum assured you’ve applied for.”