We looked into Kai's claim about his income replacement benefit when his insurer said they wouldn't pay.

What happened

Kai, a self-employed architect, had been unable to work because of some mental health issues.

He put in a claim for income replacement benefit under his income protection policy. His firm accepted his claim but said he wouldn't get any benefit as he was still getting earnings from his business.

They calculated Kai's entitlement to the benefit in line with the policy's terms. This required taking into account continuing income. Kai's continuing income from his business was £55,000. This was more than the maximum allowable benefit. This limit was calculated as 75% of the first £50,000 of his annual earnings immediately before the start of his disability.

Kai didn't think this was fair, so got in touch with us to investigate.

What we said

We looked at the facts and evidence of this to come to a fair decision. Kai said that when he arranged the insurance he'd provided the firm with copies of his accounts. He said that the firm's adviser hadn't calculated Kai's annual earnings - including both 'drawings' and share of profits. He said that only his annual drawings had been used. So Kai said the level of earnings that needed replacing (£50,000) had been undervalued.

But we didn't see any evidence that Kai had supplied his accounts at the time he took out the policy. We saw that the firm's adviser based the calculation for the appropriate level of benefit on Kai's gross earnings. This is what was declared on the application form.

We decided that the income replacement benefit provided was likely to have been appropriate at the time of sale. Even if this weren't the case, the claim wasn't affected. We felt that Kai hadn't had enough of a reduction in income to justify a payment of this benefit. So we didn't uphold Kai's complaint.