Kathryn Knowles 

So there’s a bit of a background, I’m just going to give a few different areas when it comes to pilots when we’re looking at the protection insurance side of things. So we have your commercial pilots. So these would be your parents who are the ones taking you on your regular holidays abroad, if we’re lucky enough to be doing that. And then we also have things to consider, such as test pilots, or military pilots, or potentially even people just flying as part of a general hobby. So I’m going to chat about commercial pilots first, because it’s probably the one we’ve got the most to talk about in terms of some really insert different things that happen with the income protection side of things.

Kathryn Knowles  01:19

So for commercial pilots, life insurance, and critical illness cover are generally going to be fine with most insurers. And what’s really interesting. So this podcast is obviously very clearly known for speaking about what’s known as a risk situation. So insurers may be looking at something on an application for life insurance, critical illness, cover income protection, and thinking is an extra risk here of this person making a claim. And a lot of the time that is focused upon a person’s medical history. So it’s quite interesting, if you are speaking to somebody who is a pilot is very likely that they have their or their health, it’s probably in a very, very good level, it’s very likely that you are going to be doing research focused upon the occupation, rather than their health, because they must be in very good health, to be able to keep their licence, and to be able to continue flying. For say Life Insurance, critical illness cover, we should just be quite straightforward in what we’re able to do able to access Most insurers really, really positive options.

Kathryn Knowles  02:23

Now, income protection is quite not tricky. But it’s there’s just lots and lots to know and think about when it comes to pilots. So when we’re talking about this, a lot of pilots will get some form of sick pay. Now that could be maybe, I don’t know, six months for pay, we might even see. And we’ve come across quite a few pilots where they get a full five years sick pay through work if they’re unable to work, and do their occupation, because they are ill. And that can be a little bit confusing sometimes when we are looking at income protection policies, because I’m going to really start by going back into explaining the basics just in case there are pilots that are listening to this, and who aren’t familiar with all the insurance jargon that that we get used to as advisors. But with income protection, there’s something known as a deferred period. And it’s sometimes easier to think of that as more like a waiting time. So it’s the amount of time that you are ill before the financial support from an income protection policy kicks in. And a lot of the time that can be anywhere from four weeks, up to generally up to about 12 months, there are some that can go on for longer periods than that. But for pilots at the moment, the maximum that we can usually go to is about 12 months on the deferred period for these income protection policies. So we’re gonna have a bit of an interesting thing here, because if somebody has a pilot has a six month sick pay from work, then that’s fine, the income protection policy will be set up to kick in after six months of being ill and unable to work, and then just stop paying the financial support.

Kathryn Knowles  03:59

The tricky thing is, is when we start seeing parents who have those longer sick pays something that’s more than a year, so say the ones that we’ve been speaking to recently who have five years worth of sick pay, because at the moment, the maximum that we can do is an income protection policy with a dip defer period of 12 months. So for a pilot that can be quite interesting, because they might need to, in a sense pay for a policy that can technically and the whole scheme of what a waiting period is payout after 12 months, but they’re not going to be able to access it until those five years over with their employer. So it kind of feels a bit like a logical kind of lupus case of Well hang on. It pays off in 12 months, but I can’t access it from five years but I need it to be from five years but I can only take it out to a maximum of 12 months. But ultimately, the way the market is working at the moment. That is the way that it’s is set up with income protection policies. If you have a pilot, they’ve got more than 12 months or anybody that you speak to who has a have an income that has sorry, is a sick pay from their work that is more than 12 months for a lot of insurers, there is only going to be that maximum of a 12 month deferred period. So we are going to be paying for something that we can’t access for a little while.

Kathryn Knowles  05:15

And one of the reasons there’s this we’re seeing a lot more discussion in this area at the moment is because pilots also often take up something known as loss of licence insurance. And people in the pilot community are starting to see, income protection is possibly an alternative to loss of licence insurance, there’s there’s no issue in having both. But they do do very different things. So a bit of a breakdown. So I started helping advisors who may be new in this space. So loss of licence insurance is basically where a pilot takes out an insurance policy for say, a fixed amount of money. If for whatever reason, their licence has to be revoked, and that could be on medical grounds. So as an example, a pilot might take out loss of licence insurance of say 100,000 pounds. So with that kind of insurance, the premiums are usually increasing each year as the person gets older, and the amount of insurance might start to decrease at certain ages. So somebody might take out 100,000 pounds worth of insurance, but maybe at the age of 60, when they reach the age of 60, the insurer starts to say, well, actually, we’re not going to show you 400,000 pounds anymore, the maximum will offer is this amount, it can potentially pay out a monthly benefits for somebody who is temporarily disabled. But this is taken out of the lump sum of money. So again, if someone’s took out, say 100,000 pounds worth of loss of licence insurance in case their pilot’s licence is revoked, they are placed on temporary disablement, they start taking them on through benefit, that amount is coming out of that 100,000 pounds.

Kathryn Knowles  06:49

So the benefits that we see with income protection is that the monthly sum assured isn’t going to decrease over time. If we’re able to say arrange a policy that’s going to protect 3000 pounds with the monthly income, it is going to stay at 3000 pounds, all the way up to when that policy ends, they can be locked in place to retirement age. And what’s important as well as that we can lock the premium in place to there are options where we don’t do that which they’ll start off cheaper at the beginning. But then they will still increase with age. And it’s really important to if you are looking for that option to see and check what the premiums are the total premiums over the full term of the policy. And if you’re wanting to look at that option, because the ones that are reviewable, and will change over time, there’s sometimes what’s known and in the show as well. There’s age costed or age banded. And actually, sometimes when you look at them, and you look at the amount of insurance that the premiums that you pay over the length of the policy, it can sometimes work out much better financially to take out the slightly higher premium now. But if you are using an advisor, or you are an advisor, just have a look at those two differences between those two options, because you’d be surprised at how much that can change. I use examples when I’m doing training for people. And we can be looking at potentially 10s of 1000s of pounds more expense by taking up the cheaper premium at the start.

Kathryn Knowles  08:11

There are a few insurers who are working in the income protection space for pilots, it’s really important to do the research, some policies will end at age 60, regardless of when the person is intending to retire. And some can be very expensive as well compared to other options just because of the fact that the shows are pricing quite highly for the occupation. And then you can get some ones that are much much more affordable. The only thing is that you do usually have to access them from an advisor, they’re not usually direct to consumers. So it’s a little bit of a summary here on this kind of thing. So loss of licence insurance means the licence has been revoked. The money is going to pay hours once the licence has been fully revoked, the differences within can protection the licence doesn’t need to be revoked, it is for any reason that you are ill and cannot do your occupation. And not always citizen but would usually find that the maximum age to take out loss of licence insurance is around the age of 45. Whereas we can potentially take our income protection cover all the way up from when we are even up to the age of 59 we can potentially take that policy out and with the income protection and say it can with some insurers, they would stop at age 60 Some we can potentially be going up to age 65 which is generally when we would expect pilots to be retiring.

Kathryn Knowles  09:33

So now to look at some of the other ones. So maybe occupation wise we’re going into the more riskier side of things. So the test pilots, helicopter pilots, military pilots, for life insurance and critical illness cover we are generally going to be seeing premium increases with Most insurers. Not all but the majority of them. We will be seeing that. It varies depending on your test pilots as well as to what options we can look at as to what type of craft aircraft you are testing. There can be nervousness around what kind of risks there are naturally you are testing aircraft that haven’t been necessarily tested significantly before, they’re not as well known as some of the other aircraft, you’ve maybe gone through decade’s worth of testing. And the insurance plan just wants to know a bit more about that. And you might even find as a test pilot that you do need to really look at some specialist options. Income Protection for military pilots is very tricky, and usually not available, what you usually find is that if you are in the military, you are a pilot, you’re wanting to protect your income, that you would is most likely going to be available if you are more on sabbatical from work within the military.

Kathryn Knowles  10:41

And for income protection for test pilots and helicopter pilots we are talking quite specialist insurers for this. And it can be some really unique terms and conditions, that it is a really good idea to have an advisor to help talk them through through those extra bits with you, and make sure you fully understand what you’re getting. And just another very quick thing as well, just going back to the military pilots for a second, in terms of life and critical illness cover. It really will depend upon things like any deployments that are upcoming where you might be getting deployed to, things like that will be things that the insurer is going to want to ask you about.

Kathryn Knowles  11:20

And now just towards the end of today it’s going to be a short episode today, we’re going to be looking at pilots as a hobby. And you might sort of think, well, how is this going to be, you know, particularly an issue because you obviously we talked about military pilots, you’ve said that can be quite straightforward, maybe even standard terms at times. But people who were doing flying as a hobby can actually find it quite difficult to get insurances may be more difficult sometimes, compared to commercial pilots. And that is from the very nature that, you know, the software, the standards, in terms of the craft, in terms of all the health and safety regulations, they are absolutely there for commercial pilots, but ever sorry for commercial pilots, and probably pilots, but with a commercial price they’ve got in pretty incredible teams, they’re huge amounts of technicians who are constantly checking the aircraft. And for someone who’s doing as a hobby, we’ve got a complete mix there, we’ve got someone who’s maybe doing as a hobby, as a very specific M centre, where there are all these technicians, they’re doing these wonderful things, or you could also just have somebody who’s kind of fixing up the aeroplane themselves. And so we just need to be very conscious that this in the hobby space, we’re talking about past times, that can be quite different. The insurers are going to want to know what kind of aircraft is flying. And usually, we’ll be talking about whether or not is fixed wing, all those who are living there would also want to know how many air hours are done each year, how many hours the person has in total, and if they’re flying just in the UK, in the UK, side, or abroad to. So for life and critical illness, there can sometimes be options for standard terms. You know, we’re not saying that it’s definitely always going to be very tricky, but you know, there are options, but we are talking where there’s probably not huge amounts of flying each year and it’s based in the UK as well. Not always I can’t say that’s always the case. But generally that is what we would be expecting for quite a lot of people that are going to be premium increases. And these can massively change depending upon the insurer. And depending upon the person’s individual circumstances.

Kathryn Knowles  13:28

So when we are getting premium increases, for somebody who’s working, who’s doing sort of the hobby side of flying, the increases tend to happen either as a percentage, or what is known in the insurance world. And forgive me because it’s incredible jargon that’s trust me is just as confusing for advisors, as everyone else is something known as a per mil rating. So percentage simply means as an example, if you have, let’s say, I’m gonna do some really, really small maths here to hopefully try and help me to explain it as clearly as possible, and hopefully make it as clear for you guys as well. So let’s just say we have life insurance, a five pound per month offer to somebody, and they are told that they’re going to have a 100% increase to the policy premiums due to their flying as a hobby. Now, what that would mean is that that five pound becomes 10 pound per month. So that’s our percentage increase works. Now per mil, I’m not going to be able to do the numbers as a as a as clearly as possible because to be honest, I forgot to try and do a personal rating before I got on the episode, but I’ll just explain it as to how it works. For a lot of people a personal rating does mean that the insurance becomes very expensive compared to that percentage. So that means the reason that whole thing is because a per mil means that the insurer is increasing the premium for every 1000 pounds worth of cover. That’s taken out. That changes, there’s different ways that they will do that there’s different numbers that are involved is it’s a bit too tricky for me to explain here. But just as an example, if you were told that there was an extra, if you were taking out 50,000 pounds worth of life insurance, I’ll try and keep it simple as possible, you might be told that you’re going to have a permanent rating. So that means that when the show is saying, We’re gonna increase your premium, because you’ve took out 50,000, so that’s 50 of those 1000s, that premium will increase 50 times whatever that increase is being stated as. So then if you are taking out 150,000 pounds worth of cover, we’ve got 150 of those 1000 pounds. And that would mean that whatever that increases, it will be done by 150 times. So with the per mil, the more insurance, we’re taking out, the significantly more expensive, the premiums tend to be.

Kathryn Knowles  15:55

Now for people who are in this situation, and for advisors who are looking at this situation as well for their clients, there are options that we can do. And I’m going to say these specific options very much with my compliance hat on, okay, because there are some insurers where we can maybe say to them, right, instead of doing this per mil increase, where it’s going to get significantly more expensive. How about, we exclude claims relating to the flying. Now, I do appreciate that anyone listening to this, they’re probably gonna think exactly as I think, really don’t want an exclusion on these policies for flying because flying is obviously it you know, it can be really safe, it can, it is also more risky than say, just generally not being in an aeroplane, let’s put it that way. We do not want an exclusion if we can help it. But if we have somebody who’s maybe the the assurance that they really need is going to cost them, let’s just pull a random figure out there, let’s just say it’s been increased to 250 pounds per month, and it’s just not affordable at all, they’re gonna have to walk away from getting insurance, it is better for them to walk away with insurance with an exclusion on it, rather than walking away with nothing. So from my compliance hat for advisors, and for generally, just for people who are listening who may be pilots, what I would say is, I would always say this, have a look at both options, we absolutely do not want the exclusion on there. But we absolutely don’t want you to not have that insurance. So make sure you look at both have a look at the option, the pricing, but there is the exclusion and have a look at the pricing where the exclusion isn’t there, we would definitely want you to have that option that doesn’t have the exclusion. Again, still talking about people who are doing flying as a hobby for income protection, this can potentially be available as standard terms with some insurance, it does massively depend upon the aircraft that you’re flying, and the amount of hours that you are doing. But you might well find that you do need to speak with an advisor to be able to access a policy on standard terms.

Kathryn Knowles  18:06

So I have a bit of a case study here. And I’m going to do it based upon the income protection side of things just a nice shot one to end off the episode for you. So we have a commercial pilot and in their early 50s And they were a nonsmoker. So it’s important to say nonsmoker here because for anybody who isn’t familiar with insurance, if you are a smoker, it’s quite likely in protection insurance. That’s that means life insurance critical illness cover income protection, that your premiums will increase, potentially almost double. If you are a smoker, there are times that those increases can be removed if you are able to stop smoking stop using any form of nicotine for a certain period of time, but it’s always just worthwhile bearing that in mind. So we’ve got somebody commercial pilot, nonsmoker earning close to about 195,000 pounds a year. So we were able to arrange an increasing income protection policy and increasing and this means that each year, the monthly benefits that we arrange will increase to offset against the rate of inflation, which is something we want to do to try and make sure that the income level is keeping track with the way that the worth and the value of money. As time goes on. You might see that as known as RPI linked up or even potentially CPI

Kathryn Knowles  19:25

linked cover. So with arranged increasing income protection of 4750 pounds per month, and we also made the claim that was able to last two retirement age some policies will maybe say well you can claim a maximum of two years or maximum even a five years per claimable event, but with income protection for the majority of people we want it to potentially pay all the way to retirement age. You will find that a lot of pilots will retire at the age of 65 but some will want to retire earlier and for this person that we supported they have full intention to retire At the age of 16. So again, let us put my compliance hat on for advisors, what we did is we gave the client both options and we said, look, technically, you might, you know, circumstances change, you might not return to age 65. This is the price. This is the price for age 60. Because we do appreciate that that is your financial plan. And they did decide to go for that age 60 option. So as I say they’re in their early 50s, something happens to them, and they’re unable to work due to ill health, then the insurer is going to step in and pay them their income all the way potentially to the age of 60. If they can never work again, for their occupation. This person we put in place at 26 weeks deferred period because they got full sick pay for six months from their employer. And this ended up leaving a policy with a guaranteed monthly premium of 89 pounds per month. Thank you for listening, everybody. I hope you’ve enjoyed this little short one and do let me know if you are enjoying that it’s obvious have insights into different occupations because I do tend to focus on health. So this podcast, but be really good to know if you do find these useful as well. Next time, I’m gonna be back with Matt van and we’re gonna be talking about sickle cell and protection insurance. If you’d like a reminder for the next episode, please drop me a message on social media or visit the website practical Haven protection code at UK. And don’t forget that if you have listened to this as part of your work, you can claim a CPD certificate on the website as well. Thanks to our sponsors, the Octomembers. Thank you everybody. Bye