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Policy types

Annual vs Continuous, Discretionary Mutual, Indemnity vs Benefit

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Policy types

There are many different policies out there and lots of different options to choose from. Here are a few things to look out for when choosing your policy.

Annual vs continuous policy

The difference between an annual and continuous policy is mostly relevant when it comes to renewal.

A continuous policy will carry over your ongoing claims from one year to another, also recording your exact claims history.

An annual policy resets everything and effectively starts again with any pre-existing conditions being taken from the ‘renewal date’. Any ongoing claims will not be paid from the renewal date or will be added at an extra cost to your new premium.

Due to its restrictive nature, you will find an annual policy to typically be 25% cheaper than a continuous policy. Some providers will also try to disguise an annual policy by using terminology such as ‘continuing annual’ or ‘annual renewable’ policy.

Discretionary mutual

A discretionary mutual, commonly known as mutual societies or a funding group, is a form of protection to cover members against a certain event or risk, such as staff absences. However, mutuals such as these are discretionary, where the member only has the right to have their claims considered, and not necessarily paid.

Mutuals have the choice to either pay, not pay, or reduce the financial amount due to be paid dependant on their own financial position. Therefore schools considering discretionary mutuals should also consider self insuring.

Members of a discretionary mutual are not regulated by the Financial Conduct Authority and Prudential Regulation Authority, do not have access to the services offered by the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS) in the event of a complaint or the failure of the mutual society to meet its financial obligations.

Indemnity vs benefit

An indemnity policy pays you back the costs you have incurred such as engaging a supply teacher, minus any excess or waiting day period. Therefore, if you have a staff absence which is covered by an existing teacher, you may not be able to claim. It is also time consuming and involves paperwork to prove lengths of absence and costs incurred.

A benefits policy pays you a fixed amount (called a daily benefit) for every day of absence over the waiting day period, regardless of what costs have been incurred. Therefore, no proof of supply is required, and you can still be covered even if you employ full-time cover teachers.

It is important that you choose the right policy to fit the size, budget and requirements of your school.

When searching for a policy, make sure you ask the provider…

Do you offer a continuous or an annual policy?
Is your cover in any way discretionary?
Do I have the right to have my accepted claims paid?
Is it an indemnity or benefits policy?