I'm sure that for some, I sound like an old tape recording but as long as there are pilots out there asking these questions, I will fore warn them about LOL:
There are 2 types of LOL insurance:
1. One off pay out in the event the licence is revoked.
2. Loss of salary remuneration scheme.
The former pays mega bucks in a one off payment and the premiums can be very steep (example: for £250,000 cover, you are looking at £2000/yr premium (ish)).
The latter pays UP TO your old salary on top of your new (non flying) job, for a fixed period (2yrs etc). Premium for this is small (suggest £500/yr).
This next statement is the most important thing to remember:
LOL ONLY PAYS OUT IN THE EVENT YOU LOSE YOUR LICENSE FOREVER.
(examples of LOL are: terminal cancer / diabetes / certain heart issues etc.
ALL other groundings lead to SUSPENSION of your license by the CAA which means you will NOT get the insurance money.
[90% of all LOL claims are rejected on these grounds].
It is because every other illness can, theoretically be cured/resolved in the future, no matter how long it takes...OR, you can fly twin pilot with your particular ailment thus allowing you to retain your license.
ALL lol insurances are predicated on what the occupation of the insured, is. And for nearly all insurances of this type, the policy describes the individual requiring cover, as: PILOT. This means that as long as you can pilot ANY aeroplane (even if you are not qualified on type), you won't get paid.
The secret is to negotiate with the LOL issuers and get them to change it to your specific occupation. For example:
Let's say you are a single pilot IFR driver for an offshore company. You fail your medical because of a detached retina after a swimming accident. You will lose your JOB because the CAA will not authorise you to fly without a second pilot. The insurance company will NOT pay out because the policy says you are a PILOT. Theoretically you could go fly for an airline as a second pilot.
To get round this - you get the insurance company to change your occupation to: PILOT: single pilot operations only. That way, when you lose your job, you can claim your insurance. (Some companies protect their terms by preventing you from flying for a further 'x' years after the payout).
BE WARNED: READ THE POLICY. Secondly you get what you pay for: There is no such thing as comprehensive cover for a pitiful premium.