PPI or Income Protection?

tx2online

Barclaycard are charging me £52.00pm for PPI on a £7000 balance, whereas I can get £5000 PPI cover for £35 from paymentcare, obviously a £2k shortfall.

Trouble is, for about £25 a month via Cavendish, I can get Income Protection of circa £1000 per month (after 6 months, as I get paid for the first six months of absence by my employer)

I don't quite understand what the difference between PPI and IP is. Why is PPI seemingly more expensive?

If I can get £1000 income per month for £25 which would cover my needs, do I need to get PPI?

I would be able to meet the credit card payments out of that £1000, but only what I pay now which is the minimum plus a bit.

Would PPI pay more off over any period for which I was claiming?

I really, really don't understand how all this works!

My own thoughts are that I should get Income Protection as it is a cheaper outlay per month and would cover much more than PPI alone.

What do others think?

Needless to say, I have told Barclaycard to cancel my PPI, so I do need to get something in place.

Thanks folks

jonesMUFCforever

You need to check the terms and conditions of the PPI - what does it cover and for how long - just as you need to check how much the income protection covers and for how long?

The obvious difference is that you are much more likely to be unemployed or sick for a shorter period of time and very unlucky to get an illness that would incapacitate you for say 9 months or longer.

dunstonh

I don't quite understand what the difference between PPI and IP is. Why is PPI seemingly more expensive?

IP doesnt exist as a single product. IP could mean payment protection or permanent health insurance - PHI - (which comes in budget, standard and comprehensive forms).

PHI is typically more expensive than PPI as it covers more and lasts for longer. The fact you have it cheaper than PPI suggests you are looking at a budget PHI policy rather than a comprehensive one. That is unless you are young and in a clerical job.

Would PPI pay more off over any period for which I was claiming?

PPI on credit cards is more expensive than standalone PPI.

tx2online

dunstonh wrote: »

IP doesnt exist as a single product. IP could mean payment protection or permanent health insurance - PHI - (which comes in budget, standard and comprehensive forms).

PHI is typically more expensive than PPI as it covers more and lasts for longer. The fact you have it cheaper than PPI suggests you are looking at a budget PHI policy rather than a comprehensive one. That is unless you are young and in a clerical job.


PPI on credit cards is more expensive than standalone PPI.

OK, maybe I'm just being dumb here?

Cavendish 'sell' Income Protection. You get up to 60% of your gross income.

See http://www.cavendishonline.co.uk/life_assurance/income_protection.php

No mention of healthcare et al, just a scheme which will give you an income in the event you are without (accident, sickness, unemployment)

Credit card Payment Protection just pays your credit card under the same eventualities, yes?

http://www.paymentcare.co.uk/index.php#credit%20card

I get paid for 6 months by my employer in the event I am unable to work (obviously not for unemployment!) so I don't really need to concern myself with immediate cover in the event I am off work longer term, but were I off for longer than 6 months, things would be 'awkward'.

Now, if I can get Income Protection for £25 a month, which would pay me £1000 income per month for 12 months, in turn covering all my outgoings, is that not better than just getting Payment Protection at £35 a month which would only cover me for a credit card balance?

Or is that not how it works? It seems a no brainer to me, but maybe I'm having a no brain day!

I am but a financial simpleton, so words of one syllable and in a language I can understand would ease what has been a very demanding first day back at work :mad:

dunstonh

No mention of healthcare et al, just a scheme which will give you an income in the event you are without (accident, sickness, unemployment)

The plan you link to does not cover unemployment and is a permanent health insurance. I havent checked the policy conditions to see if its a budget or comprehensive version.

Credit card Payment Protection just pays your credit card under the same eventualities, yes?

Similar, which is why they both fall under income protection but not the same. Underwriting and claims acceptance and methods will be different as well as the PHI not covering for unemployment.

payment protection is really budget income protection. PHI is higher quality as the insurer cannot cancel the policy and with guaranteed premiums, cannot increase the price at any time. Plus, the payment period will go up to the end age if necessary as well as you being underwritten at point of sale and not point of claim (like PPI).

tx2online

dunstonh wrote: »

The plan you link to does not cover unemployment and is a permanent health insurance. I havent checked the policy conditions to see if its a budget or comprehensive version.



Similar, which is why they both fall under income protection but not the same. Underwriting and claims acceptance and methods will be different as well as the PHI not covering for unemployment.

payment protection is really budget income protection. PHI is higher quality as the insurer cannot cancel the policy and with guaranteed premiums, cannot increase the price at any time. Plus, the payment period will go up to the end age if necessary as well as you being underwritten at point of sale and not point of claim (like PPI).

OK, it's slowly becoming more clear!

The "Income Protection" I linked to on Cavendish's web site is long term then, in that it will pay out up to a given age if you are unable to work through illness et al.

I see it doesn't cover unemployment - I think I might have been getting confused when I previously suggested it did, apologies.

So, can I put a scenario in the frame.

Mr Smith is involved in a serious car accident, and is in hospital for a few weeks, but thereafter, has a long rehabilitation period of say 5 months which will mean he is unable to work for a total of say, 8 months.

Would an Income Protection pay out in this scenario, maintaining the level of income he would 'enjoy' were he working? If his employer paid him for the first six months, he would receive the income from the scheme for the remaining two as he had chosen a deferral period of six months. Yes?

Scenario 2 :

Mr Smith goes back to work after 8 months, but a few years later has a stroke and is unable to work due to disability. He is either sacked or resigns after 6 months of sick pay from his employer and the outlook is likely that he probably won't be able to work again.

The "Income Protection" scheme would therefore now kick in and pay him the monthly benefit until he reached the age at which the plan was set to stop, i.e. 65. Correct?

Replace car accident with critical illness or recuperation in scenario 1 - would the benefit still be payable for the duration of absence?

Is there any limit to the number of times the scheme would pay? Could you have a 'claim' one year, and then five years down the line have a further claim, and if you were really unfortunate, a few years later claim again until the plan end?

As for Payment Protection, that is designed to cover short term payments such as credit cards where a monthly amount would be met, and if the maximum benefit were taken, up to an amount of £5000. That type of policy would not substitute payment of credit cards longer term. Correct?

If I am right in this then, and the sort of cover I want is to ensure a longer term income, then PHI is the better option?

PPI will simply meet the payments on a credit card up to a certain point, and then stop. Yes?

I really do appreciate your advice, as I am not at all clued up on financial services.

dunstonh

Would an Income Protection pay out in this scenario, maintaining the level of income he would 'enjoy' were he working? If his employer paid him for the first six months, he would receive the income from the scheme for the remaining two as he had chosen a deferral period of six months. Yes?

yes.

Mr Smith goes back to work after 8 months, but a few years later has a stroke and is unable to work due to disability. He is either sacked or resigns after 6 months of sick pay from his employer and the outlook is likely that he probably won't be able to work again.

The "Income Protection" scheme would therefore now kick in and pay him the monthly benefit until he reached the age at which the plan was set to stop, i.e. 65. Correct?

Yes. With caveats. One of the differences between budget and comprehensive versions is to cover own occupation only or any occupation. A stroke may prevent your current occupation but it may not prevent any. Some of the really budget versions may not pay out to 65 (or selected end age).

Replace car accident with critical illness or recuperation in scenario 1 - would the benefit still be payable for the duration of absence?

yes

Is there any limit to the number of times the scheme would pay? Could you have a 'claim' one year, and then five years down the line have a further claim, and if you were really unfortunate, a few years later claim again until the plan end?

PHIs cannot be cancelled by an insurer (thats where the permanent comes from). The budget ones can put restrictions in place on how long you have to re-qualify in the event of claims.

As for Payment Protection, that is designed to cover short term payments such as credit cards where a monthly amount would be met, and if the maximum benefit were taken, up to an amount of £5000. That type of policy would not substitute payment of credit cards longer term. Correct?

Some will just pay a monthly payment and not a lump sum. So, you have to be careful. However, on that assumption that it is lump sum upto £5k then yes.

If I am right in this then, and the sort of cover I want is to ensure a longer term income, then PHI is the better option?

Yes. PHI nearly always beats PPI. You tend to find the internet has better coverage on PPI as its easy for them to sell, higher profit and less admin. Plus, many life insurance companies dont provide online quotes and require them manually. I think the Cavendish one is likely to be a white labelled version of the one of the insurance companies product (i.e. their label is on the product rather than the insurer but its the same product). Thats just a guess as normally Cavendish offer a limited panel on their products available. I didnt see any sign of that on the very quick look I did earlier.

PPI will simply meet the payments on a credit card up to a certain point, and then stop. Yes?

yes. And probably void the policy afterwards preventing any future claims or have a clause not allowing any future claims in that area within a defined period.

tx2online

dunstonh wrote: »

If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser who can advise you after finding out more about your situation.

Do you know of a web site or organisation where I can look up IFA's for this area? I live in Eastbourne, East Sussex.

Thanks again, your contribution has been very helpful.

cjgoodsell

dunstonh wrote: »

PPI on credit cards is more expensive than standalone PPI.

Have the FSA stopped the sales of standalone PPI now? I know that was something they were looking into

dunstonh

cjgoodsell wrote: »

Have the FSA stopped the sales of standalone PPI now? I know that was something they were looking into

There are no plans for the FSA to stop the sales of standalone PPI. It is considering stopping the sale of PPI at the same time as taking out a loan.

In fact, the preference for PPI, if that is what you want, is for it to be standalone. Had it been standalone in the first place then there wouldn't be quite the issues on PPI that there are.