Income Protection - General Question

webslinger2k

Hi all, My first post here - been a long time lurker, but registered today and am really worried.

I have managed to get myself very paranoid about my income - nothing has been announced, or even hinted at, at work - But I just have a bad feeling that all is not well - this has in turn led me to go on a quest to find the best Income Protection Insurance. I have just started a new role as a Network Engineer within my company (worked 8 years) and if I was to be made redundant, I feel quite vulnerable as to find anotehr job paying a similar wage - which was what got me thinking to begin with to be honest.

The Insurance I want (if it exists) would cover me for the event of enforced redundancy, so its a complete policy to cover my monthly income, not just pay off my mortgage.

I have a credit card which i owe about 1k on, and a loan with about 4k outstanding, these are currently paid up with monthly repayments as structured by my agreement at the time. On top of that, then is the mortgage which of course, is the most important thing to pay.

I am looking for a policy to protect me in the event of unemployment, and pay for those things stated above while I try and find another job.

As for getting a policy set up - is there a standard time you have to be paying into the policy before it kicked in? as someone once mentioned to me, they had to pay into their policy for 6 months before they were actually entitled to the protection.

Very naive when it comes to these insurances unfortunately I have a young child and wife to support, so really need to cover ourselves for all events.

thanks in advance for any help.

jasonking

You can buy Unemployment only insurance, it is usually linked in with Accident, Sickness and Unemployment cover however the better brokers are able to source just the 'U' bit. However cover is usually linked to the mortgage repayments plus a small surplus to cover mortgage related insurances, so you might not be able to get the level of cover you would ideally like. You can insure up to 65% of gross earnings with some providers though.

You have to be careful though as there are exclusions, for example it will only pay out in the event on involuntary redundancy (many redundancies are actually voluntary when you look at the paperwork) and if the job is of a seasonal nature or unemployment is a regular feature of your inductry (strawberry picker for example).

Also if the insurer gets any evidence that you knew of impending unemployment when you took the policy out then they can avoid a claim.

Finally there is usually an initial exclusion period and can vary so check this out before you buy. Try http://www.moneysupermarket.com/ASU/IncomeProtectionDefault.asp for a guide and quotes.

exil

The policy shown covers you to 12 months and costs about £80 a month for £1500 a month cover. That is, you are buying £18,000 of insurance for about £1,000 a year. In other words, probably not worth doing as a long-term exercise.

Oddly enough the cost doesn't depend on what sort of job you have. A "job for life" costs the same to insure as an insecure job (as long as it isn't seasonal or fixed term).

An interesting angle to this is that whilst you were getting this insurance you would get contribution-base JSA but not income-based (non-contributory).

What I've been looking for is a policy that would cover me if I was jobless for over a year between now and collecting my pension. I suspect there is no such thing! Looks like it's the dole or nothing if everything really goes pear-shaped.

regularsaver1

Some income protection does not provide unemployment, so worht having a check

dunstonh

permanant health insurance does not provide unemployment cover but can go on until selected termination age (usually 65). It is also underwritten to your circumstances and cannot be cancelled by the insurer, regardless of how often you have claimed. PHI is often called Income Protection

ASU (accident, sickness, unemployment) is often incorrectly referred to as income protection. It is not underwritten to your circumstances and too many people have one of these where it is actually totally useless for them.

If you are looking at income protection, make sure you pick the right one or combination of the two (very common option).

regularsaver1

I have a policy with Norwich Union (although actually called Halifax Income Protection Plan) - this is PHI, and i tie it in with my benefits with work.

the only annoying thing is - as of last December I got an extra 6 months full pay at work so called Norwich Union to make a change to my plan , and to date with a lot of "yes this will be done" this has still not been done.

I may think of moving elsewhere - or do you think I should stay put?

exil

PHI is good - I have it myself - but doesn't cover you if you are made redundant and
due to age or lack of vacancies take a long time to find another job (or can only
find a job at much lower pay).

Example - you're on 30k. Mortage 120 (4 times salary). You lose your job. Payment protection kicks in. You eventually get another job at 15k - but still have to pay the 120k mortgage.

webslinger2k

thanks for all the help. I think a call to my insurance company tonight to see what additions they can offer is in order. I shall let you all know how i get on.

thanks again!

regularsaver1

I feel another call coming onto Norwich Union - if they can't sort it this time, i shall move it

webslinger2k

Well I called them, I was informed that the cover I was asking for wasnt something they catered for....surely they are talking balls? redundancy cover is a standard type of insurance I thought, not unfamiliar to a company like NU.

grrr...the search continues.

thx again

dunstonh

webslinger2k wrote:

Well I called them, I was informed that the cover I was asking for wasnt something they catered for....surely they are talking balls? redundancy cover is a standard type of insurance I thought, not unfamiliar to a company like NU.

grrr...the search continues.

thx again

No, its not a mainstream product issued by the major insurers.