Sick of the pressure

Can you protect your finances if stress-related illness costs you an income?

Under too much pressure? According to a recent survey by Direct Line, almost half the population is too stressed to check credit-card bills, bank statements, or bills. Meanwhile, each working person takes more than three days off a year, on average, because of stress-related illness.

In extreme cases, stress can cost people their jobs and their livelihoods. Last year, social worker John Walker won pounds 175,000 in damages from Northumberland County Council after repeated stress forced him to give up work. But he had to go all the way to the High Court to prove his case.

Employers have a duty of care to protect staff from workloads that cause stress-related illnesses, and proven claims are paid by the liability insurance that all firms are required to carry.

But Ian Hunter, employment law specialist at solicitors Bird & Bird, says you have to prove your employer is at fault. "Is it stress created at work that causes the damage?" he asks. "If you are moving house, divorcing your wife, and having a hard time at work, which is the one that pushes you over the edge?"

Even when employees prove they are ill due to stress, they must also show that the employer could have foreseen the problem. More employers are turning to pre-employment tests and character profiling to pick up people who might be prone to stress at work. If an employee had a stress- tolerant profile, a company could use this in their defence in court.

Personal insurance policies can take a more generous view. For example, claimants only have to prove they have a stress-related illness which stops them from working to get a payout under an income protection policy (sometimes called permanent health insurance or PHI). They don't have to prove that the stress originated in the workplace.

Such policies pay out half or three quarters of a person's salary (these payments are not taxable), but only after a delay of between one and six months depending on the premium. "You haven't anything to cover for the pain and loss of earnings," warns Graham Cox of the Insurance Ombudsman's Bureau. But payment from a PHI policy does not prevent stress sufferers from suing their employers as well.

Short-term accident and sickness policies, as well as payment- protection cover on mortgages and loans, usually rule out mental disorders including stress-related problems unless there are strong physical symptoms. By contrast, most PHI policies will allow claims for mental problems, as long as the claimant is genuinely unable to work.

The criteria used for being unable to work differ among PHI insurers. The better policies pay out on an "own job" basis: if claimants cannot carry on their normal work, they receive income. In some jobs, such as airline pilots, insurers apply an "own-occupation" clause - only paying if the claimant cannot carry out equivalent work. Other policies will only pay out if someone is unable to work at all.

The medical profession is now better able to detect stress, and insurers are seeing more claims as a result. "Twenty years ago it might not have been recognised," says Peter Kelly, protection development director at insurers Allied Dunbar. "Now, if it is straightforward and a valid reason, we pay.We have quite a

few claims for stress on our books."

But insurers warn that policy payments are only triggered if stress makes someone ill. "We don't accept stress is a sickness in itself," says David Pitcher, chief underwriter at the Permanent Insurance Company. "We would be looking to see what illness it causes; we would be sceptical if someone was told not to work because of stress itself."

According to doctors, stress causes ailments including headaches and Irritable Bowel Syndrome, but these are unlikely to keep someone off work long enough to trigger a PHI policy. As Mr Pitcher says, it is mental problems such as anxiety disorders which tend to cause claims.

But watch out too for a harder line. Stress-related illnesses are rarely permanent, and insurers will expect people to return to work; underwriters have noted that people with PHI policies tend to take longer to do so.

TIPS FOR THE STRESSED

Document events that lead to stress. This helps with sick pay, and may form the basis for a legal claim.

Raise overwork at performance reviews. If this is recorded, it makes it easier to prove that an employer could have foreseen the problem.

See your GP early, and consult a specialist if necessary. A specific diagnosis, rather than simply "stress", cuts more ice with both employers and insurers.

Unlike with car or house insurance, PHI policyholders do not have a duty of care. Insurers will not say that you brought stress upon yourself and refuse to pay if you have to give up work.

PHI policies only cover part of your income. Check other policies, such as mortgage insurance, for exclusions relating to mental disorders.