Income protection - how necessary?

angel1976

Hi,

Hubby and I are in the process of buying our first place (fingers crossed!). Instead of the mortgage protection that our mortgage lender would want on the mortgage we are taking out, our financial advisor is recommending we protect our income instead so that in the event of anything bad happening, we have something to fall back on. However, we are not sure how necessary it is? So would love all your opinions on it!

What he has quoted us (for single and joint policies) the premium ranges from £50-85 per month, which obviously is quite a lot of additional money to pay out especially as it is the first time we are buying and we would want to save as much as possible... My questions are:

1. Will mortgage lenders insist that you have protection of some sort, whether it is income or mortgage?

2. Pros and cons of single or joint policies? (I know what the difference is but not 100% sure of which would be better!)

Is it possible to say, put off taking this out until we are more sure of the outgoings when we move? My father-in-law (who is a very good businessman) is of the view that this isn't absolutely necessary as if something does happen to hubby or me, it is likely the other party will just sell the place or get something more affordable and so doesn't absolutely have to keep the place (we have no kids at the mo). And that we should conserve whatever money we have for now as we will have lots of new outgoings etc.

Please advise and help me understand this issue more! Many thanks!!!!!!!!!

Angeline x

chivers1977

IF you can afford income protection, as well as the life/critical illness that you should take i would. Imagine (god forbid) one of you broke their back and could never work again, downsizing etc may not be an option if you need ramps etc. Now I pay childcare I can't pay for it so if you don't get it now, you might not......

Bargain_Rzl

Although I'm still waiting for my purchase to go through, I'm going for an income protection cover (£20/month, just me) which will cover long term sickness but not unemployment (I've been in my current full time job for over 5 years). I chose not to go for unemployment cover as I'm in London, my housing costs aren't massive, and I have transferable admin skills.

My policy will cover me for anything I get signed off work for, from the point I stop getting sick pay, and will supply a tax-free income of £1k a month.

izoomzoom

Having life assurance was a definite for us but we decided not to take out MPI although we will be taking out MPPI which covers us for a 12 month (critical illness, unemployment) period.

We figure that if something happens that is so bad (but doesn't kill us - so to speak), we have a year to figure out what to do.

angel1976

izoomzoom wrote:

Having life assurance was a definite for us but we decided not to take out MPI although we will be taking out MPPI which covers us for a 12 month (critical illness, unemployment) period.

We figure that if something happens that is so bad (but doesn't kill us - so to speak), we have a year to figure out what to do.

Hi zoomzoom,

Ok, maybe I don't know as much as I think I do but what do you mean you have taken out MPPI for a 12-month period? From what I understand, do you mean to say this protects you for a year and that's it hence you have a year to figure out what to do? Cos that sounds like a good idea to me! Could you please explain more? Thanks!

Angeline x

izoomzoom

Now you have me.

Based on info I have from our broker:

Mortgage Payment Protection Insurance - pays monthly mortgage and related insurances for up to 12 months if unable to work because of accident, sickness or unemployment after 30 day deferment (we chose because get sick pay for first month) if through no fault of your own.

Mortgage Payment Insurance - which we declined - then takes over after this and carries on paying until you either return to work, or mortgage is paid off. (but we figured we could redesign our lives during that period if necessary)

HTH

angel1976

Thanks zoomzoom! So it looks like our mortgage advisor has advised us to go to MPI instead of MPPI... When I speak to him tomorrow, I will ask him about the cost difference. I suppose because hubby and I are both young and have no dependents, it feels like a lot of money going out just to protect the mortgage (we have no debts etc). Like FIL said, if anything happens to either of us, it is likely the other party left will just sell the place, will be a different story if we have kids...

F_T_Buyer

Ok, my view:

I think there's two issues (well the way I see it), is temporary unemployment which you need mortgage payment protection and long term sick/death.

For long term sick, or if your partner died you would want life assurance/insurance etc etc

But for short term unemployment, I would bother with any payment protection policy for your mortgage. The reason being it usually would only pay you for say 10months (or whatever). After this time, if you are still unemployed you can switch to an interest only mortgage, and the goverment will pay the interest on the mortgage.

But if you were to do this, you would need 10months (or whatever the period is before the government help out) mortgage payments in savings (or at the very least the interest part of the mortgage payments).

izoomzoom

I tried to figure this whole thing out simply (which is probably wrong but I am no expert).

Life Assurance will sort us out is we have a die / have heart attack etc
If we get something less like broken leg the MPPI covers us until we get better. If we got something worse well then the Life Assurance should cover it but at the end of the day you pay for the risk that you are prepared to take.

Our broker tried to sell us all three (life, mpi and mppi) oh and he will be quoting for the building insurance too.

Explained to us that there were 4 ways that we could lose our house
1. Die
2. Critical Illness
3. Loss of income
4. Building / Contents (Fire etc)

HIHHA (hope I have helped again)

izoomzoom

F_T_Buyer wrote:

Ok, my view:

I think there's two issues (well the way I see it), is temporary unemployment which you need mortgage payment protection and long term sick/death.

For long term sick, or if your partner died you would want life assurance/insurance etc etc

But for short term unemployment, I would bother with any payment protection policy for your mortgage. The reason being it usually would only pay you for say 10months (or whatever). After this time, if you are still unemployed you can switch to an interest only mortgage, and the goverment will pay the interest on the mortgage.

But if you were to do this, you would need 10months (or whatever the period is before the government help out) mortgage payments in savings (or at the very least the interest part of the mortgage payments).

Yeah there is that too. Thanks for reminding me.

angel1976

Thanks everyone! I think I understand everything better now... I will have a word with my mortgage advisor tomorrow and basically, I need to get all quotes and then see what works out best for us in our current circumstances... I hate dealing with all things financial and this whole housebuying business is just about doing my head in (and it ain't even that complicated yet! :rolleyes: ).