Income Protection

1. Income Protection The value of Proportionate Benefit For advisers only. Not for use with customers.

2. What is Proportionate Benefit? • Proportionate Benefit is a feature of Income Protection cover that is automatically included at no extra cost. • If a policyholder is receiving Income Protection Benefit from their policy because they’re unable to carry out the occupation they were performing immediately before incapacity, Proportionate Benefit can provide a valuable top-up if they return to a different, lesser paid occupation.

3. What is Proportionate Benefit? • It becomes available where a person is receiving Income Protection Benefit and is unable to return to their occupation because of their accident or illness but instead takes an alternative occupation at a lower income, or; • Qualifies to receive Income Protection Benefit, but instead takes an alternative occupation at a lower income. • Friends Provident will pay a reduced level of Income Protection Benefit - referred to as Proportionate Benefit • The amount payable is determined using the following formula…

4. Calculating Proportionate Benefit Amount of Proportionate Benefit Paid Income Protection Benefit payable - Pre Incapacity Earnings New Earnings x = Pre Incapacity Earnings

5. Proportionate Benefit Case Study • John is 51 and works as a Barrister in London with an annual salary of £100k • He has an existing Friends Provident Income Protection policy that he took out a few years ago. • John unfortunately suffers a stroke and requires significant time off work in order to recover • John claims on his Income Protection policy and after a total of 2 years he returns to the practice

6. Proportionate Benefit Case Study • However, the stroke he suffered has permanently affected his speech • John wants to return to work but he is unable to fulfil his courtroom duties any more • However, he is able to take a lower paid administrative role within the practice • John’s new salary is £40k per annum which represents a significant pay cut

7. Calculating John’s Proportionate Benefit £1923 pw £769 pw £1038 pw Amount of Proportionate Benefit Paid Income Protection Benefit payable - Pre Incapacity Earnings New Earnings x = Pre Incapacity earnings £1923 pw £622.91 pw

8. Proportionate Benefit Case Study • After receiving full Income Protection Benefit for 2 years John continues to receive his Proportionate Benefit until his retirement age of 65, as he remains unable to perform his original duties throughout this time • This totals 11 more years • The total Proportionate Benefit John receives during this time is £356,304.52 assuming his salary doesn’t increase • And….he won’t even need to pay his premiums any more because Friends Provident's Income Protection plan automatically includes Waiver of Premium!

9. Proportionate Benefit Key Points • Proportionate Benefit allows someone who is claiming Income Protection Benefit to return to work in an alternative, lesser paid occupation without being penalised • Proportionate Benefit provides an incentive to get back into the workplace leading to a boost in confidence and self-esteem • Ultimately, it allows Income Protection claimants to maintain a decent standard of living • Proportionate Benefit is a valuable benefit automatically included in our Income Protection policy.