Income protection - Not sure whether to get it?

Help1234 · 13 November 2017 at 12:33PM

Hello,

Me and my partner are first-time buyers. My boyfriend works in the public sector and his salary is around £27,000 per annum. I've asked him to clarify with HR what his sick pay policy is and we are waiting for a response.
I'm a PhD student.

Our mortgage payments are going to be £521 per month over 35 years.

A protection consultant has recommended we take out income protection and we are unsure whether or not to do this. It would only cover my partner and not me. I was told I am not eligible due to being a PhD student. Can anyone advise? We were offered the following:

Cover: £6,000.00 each year
The amount of this cover will increase each year. We will pay this in regular monthly payments.
Term of cover: 35 years
Monthly premium: £31.66

More information about your Income Protection premium
● This premium is guaranteed, which means it won't change during the term of the cover (other than for yearly increases to your cover or unless we need to make changes in the circumstances shown in the plan details and key facts documents).
Additional features of your Income Protection
● The deferred period for this cover is 4 weeks. The 'deferred period' is explained in your plan details.
● This cover uses the own occupation definition of incapacity in the plan details.
● The amount of cover will increase by the Retail Price Index on every anniversary of the date the plan starts.
● The maximum amount we will pay is explained in the section ‘How much we will pay’ in your plan details.

Cover 2 Waiver of Premium (Sickness)
Term of cover: 35 years
Monthly premium: £1.89

More information about your Waiver of Premium (Sickness) premium
● This premium is guaranteed, which means it won't change during the term of the cover (other than for changes in line with changes to the total monthly premium you are protecting, or changes to the cover that you may choose).
Additional features of your Waiver of Premium (Sickness)
● The deferred period for this cover is 4 weeks. The 'deferred period' is explained in your plan details.
● This cover uses the own occupation definition of incapacity in the plan details.

Out,_Vile_Jelly · 13 November 2017 at 12:37PM

I prefer to save a certain percentage of my salary into a Rainy Day pot to cover all sorts of eventualities. My savings account doesn't have any small print, these sort of policies certainly do.

kingstreet · 13 November 2017 at 12:59PM

Depending on length of service, he may be entitled to six months full pay, then six months half pay.

If so, you can then set the deferred period on the IP to 52 weeks which will drastically cut the cost.

ReadingTim · 13 November 2017 at 12:59PM

Help1234 wrote: »

A [STRIKE]protection consultant[/STRIKE] salesman has recommended we [STRIKE]take out income protection[/STRIKE] buy what he's selling and we are unsure whether or not to do this.

Fixed that for you, as they say.

Seriously, he would say that wouldn't he? But putting that aside, you simply need to decide whether it's something you want or need.

Firstly, how likely is it that your partner would need the product? Is he likely to be on long term sick or out of work?

Secondly, will the policy pay out - these things are notorious for not.

Thirdly, even if the worst happens to him, there's 2 of you - could you pick up the slack for a while? How long are you from finishing the PhD and what will you do work-wise thereafter?

Finally, can you afford it, or is that thirty-off quid a month better off spent elsewhere?

Help1234 · 13 November 2017 at 1:10PM

ReadingTim wrote: »

Fixed that for you, as they say.

Seriously, he would say that wouldn't he? But putting that aside, you simply need to decide whether it's something you want or need.

Firstly, how likely is it that your partner would need the product? Is he likely to be on long term sick or out of work?

Secondly, will the policy pay out - these things are notorious for not.

Thirdly, even if the worst happens to him, there's 2 of you - could you pick up the slack for a while? How long are you from finishing the PhD and what will you do work-wise thereafter?

Finally, can you afford it, or is that thirty-off quid a month better off spent elsewhere?

Haha, thank you for your reply!

1. It's unlikely my partner will need this product. He is 31 years old and has never been ill in his life, other than a fungal toenail

. So realistically it's unlikely, but he could be struck down with cancer or in a car accident same as anybody else. He works for the Local Authority but I couldn't see anything in his contract about sick pay, nor is there anything on their webpage where it says "the pay and benefits of working for us". He has queried with HR so will let you know.

2. I assumed the policies pay out when you claim if you are in an accident and can't work for a long time.

3. I finish my PhD in March 2020. My salary at the moment is £1,200 per month. After I finish I hope to be on around £30,000 per annum but will have to find a job first. We could move back home with family if he was severely ill and unable to work and try and rent the house out.

4. Considering building and contents insurance, as well as life insurance which will be higher for me as I have Crohn's disease, we would prefer to put £30 per month somewhere else. However, don't want to leave ourselves vulnerable if the consensus is this is a necessity.

PasturesNew · 13 November 2017 at 1:11PM

*removed out of date info as informed by kingstreet*

As the mortgage is so low, I'd just get about 6 months' mortgage money tucked to one side ... because either one of you would be able to get a job that could easily cover the mortgage.

If you were renting, say, it'd be considered "affordable" to rent a £521/month home on one salary of about £16k/year.

kingstreet · 13 November 2017 at 1:23PM

SMI is back to 39 weeks, PN.

Permanent Health Insurance is a great product and is massively undersold and badly misunderstood. The claims records are good, with over 90% of claims routinely met.

It is designed to replace income for the long-term in the event of accident or disability, following a waiting period where savings can be used to meet living costs and this reduces the premiums.

It is based purely on medical diagnosis of inability to work. It isn't like critical illness cover with only specific conditions covered at required levels of severity.

Typically, benefits are paid until end of policy term/selected retirement age, or to when you return to work. They are paid tax-free. The average length of a claim is six years. This greatly outlasts employer sickpay arrangements.

'Own occupation' means the insurer will pay out if you can't follow the essential requirements of your own job, not on your ability to hold a pen, use a keyboard etc.

Proportionate/rehab benefits are paid if you return to work on shorter hours, or lower responsibility or have phased return spread over an extended period.

It provides better value than life or critical illness cover IMHO and it ensures you can have a standard of living and pay your bills while off sick where otherwise the worry might aggravate the condition. We routinely recommend cover of the monthly budget and mortgage cost and divide the benefits according to the contribution towards that from net income.

G_M · 13 November 2017 at 1:25PM

Good advice above, but to just to play devil's advocate:....

He may be young and healthy (toenails yuk!) but car accidents and caancer can hit anyone at any time. You never expect it to happen you of course.

So the Q is, how would you manage the mortgage? And other living costs? Might you end up repossessed and homeless?

* how many months could you pay the mortgage from savings, extra jobs etc?
* would family rally round/help?
* how soon would the insurance pay out (check!)?
* how many exclusions are there in the policy (there will be!)?
* wiill you be working in 12 months and therefore have an income to take over his contributions?
* how risk-averse are you (both)?

If you decide to take out cover, don't just agree this "protection consultant's" policy (:rotfl: ), shop around.

* check other companies' cover levels / premiums AND
* compare the small print / exclusions etc

Help1234 · 13 November 2017 at 1:38PM

G_M wrote: »

Good advice above, but to just to play devil's advocate:....

He may be young and healthy (toenails yuk!) but car accidents and caancer can hit anyone at any time. You never expect it to happen you of course.

So the Q is, how would you manage the mortgage? And other living costs? Might you end up repossessed and homeless?

* how many months could you pay the mortgage from savings, extra jobs etc?
* would family rally round/help?
* how soon would the insurance pay out (check!)?
* how many exclusions are there in the policy (there will be!)?
* wiill you be working in 12 months and therefore have an income to take over his contributions?
* how risk-averse are you (both)?

If you decide to take out cover, don't just agree this "protection consultant's" policy (:rotfl: ), shop around.

* check other companies' cover levels / premiums AND
* compare the small print / exclusions etc

Thanks for your help!

1. We will have no savings after buying this house. I can pay the mortgage and bills from my salary but we would not be able to afford to live just on what I earn. We would have to move back home and fed for free by family.
2. It says the insurance would pay out after 4 weeks?
3. I'm not sure how to find out about exclusions. I will look into this.
4. I will be working after March 2020. Currently I take home £1,200 per month on a PhD stipend.
5. We are quite risk averse

G_M · 13 November 2017 at 1:46PM

Help1234 wrote: »

1. We will have no savings after buying this house. I can pay the mortgage and bills from my salary but we would not be able to afford to live just on what I earn. We would have to move back home and fed for free by family.
2. It says the insurance would pay out after 4 weeks?
3. I'm not sure how to find out about exclusions. I will look into this.
4. I will be working after March 2020. Currently I take home £1,200 per month on a PhD stipend.
5. We are quite risk averse

1) If you can afford the mortgage andd bills, you'r not far off surviving. Cut your cloth and you can get by on very little. May be manageable?
2) you are asking us? we don't knw! Read the policy document.
3) Get a copy of the policy document and read it! If your 'consutant' has not offered it to you, then run a mile! Never sign any contract till you've read & understood it (and with insurance that means the polcy doc).
4) Once you start work after finishing your PhD, do you anticipate earning more? If so, you could afford the food on top of the mortgage and bills, so it's just the first year you have to 'survive'.
5) then maybe consider life insurance too. And critical illness? Private health cover so you don't end up on NHS waiting lists? Pet insurance (but only if you have a pet!)? Accidental Damage on top of your buildings insurance. And Legal cover. Boiler breakdown insurance (and maybe electrical/plumbing cover too?)?

Note: most of those I'd skip........

westernpromise · 13 November 2017 at 1:48PM

I've had income protection policies in the past, against redundancy rather than sickness, and found two things. First, you can only buy them if it's clear you'll never need them. If you're in a line of work where you are likely to need the insurance you will generally find you can't get it. Second, what they pay out is usually so far short of what you need that you're still completely scr3wed even with the insurance. The last time I had one of these I had rent to find of £3400 a month, and the maximum payout I could find on any policy was £1500.

The policy you have sounds a bit expensive TBH. You'd be forking over £380 a year for a maximum payout of £6,000, which would be over 13 months so that if you recover it will be less. That means that unless more than one Billy Bunter in 16 makes a claim, the company makes money. I doubt the chances of a claim are really that high.

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Income protection - Not sure whether to get it?

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