Income prptection plan advice

Katie_H

We're moving house so I've decided to overhaul our income protection and life assurance, been meaning to do it for years. So the life assurance is easy to sort out but I'm not sure what to do about the income protection. At the moment by husband has a policy which was taken out through the mortgage lender and looking into it I could get him a much cheaper policy via an online broker which would actually offer him better cover. Although he is only covered for a year whereas I thought it was up to 65 so reading on here it seems he would need PHI to do this. But having read the notes on MSE website about how if you take out a plan when there is a risk of redundancy I am concerned it may be a bad time to switch. That said his company has not shown any concerns about redundancy so he's at no more risk than anyone else at the moment. So my first Q is should I switch his policy, it would save approx £12/month for better cover, although that doesn't include PHI which I need to look into.

The second Q relates to me, I never set up income protection as when we bought the house I was a student so no income to protect! But the compnay I work for sent out the you may be made redudant letters a few months ago so there is no way I should take out a policy now, very annoying as we now have so much work we're doing overtime. It's a small company and the directors overreacted. So how long until I would be classed as no longer at risk and therefore worth taking out a policy? In the meantime is there any policy I could take out which would cover me for illness or am I better off waiting until it's worthwhile me taking out income protection?

I'm trying to get my head round it all before we sign for the mortgage on Friday as I'm sure they are going to try and sell us loads of overpriced policies again :-)

Thanks
Katie

-Vita-

I appreciate you are pretty savy in this area. However, just to re-iterate for others, an Income Protection policy is designed to provide replacement income if you were unable to work due to accident, illness, sickness and injury.

You make reference to redudency cover, this is typically a bolt-on to Income Protection or included as standard in an ASU (Accident, Sickness or Unemployment) policy.

As you are aware, there are many variables in terms of what cover you have taking into consideration the monthly benefit, waiting period, claim period and ability to claim multiple time, reviewable/guaranteed premiums, whether the policy is underwritten (in terms of proving income) at outset or claim stage, standard exclusions, additional support provided by the insurance provider if you do have to make a claim....

There are many factors. If you analyse all the details and weigh up what's most suited to you and your partner, then you should be confident you have the correct cover, then it's just a case of finding it for the lowest-cost.

What is your preference on either IP or PHI? A few of the forum users will give you a good overview of the benefits of each....

Katie_H

Hmmm, thanks, on closer inspection of hubbys IP it turns out he's not covered for redundancy anyway. Maybe it's time I read that how to be your own finantial advisor book that's gathering dust. That or bite the bullet and actually pay someone who understands all this, my Yorkshire roots make me hate parting with money though

Dare I ask what is the difference between IP and PHI, as I though IP was what you have refered to at ASU and paid out for a year whereas PHI was for illness only and paid out until a chosen age eg 65

-Vita-

There are plenty of fee-free Insurance Advisers who can provide advice, quotes and assist you throughout the application process, without you having to pay any fees.

When I speak to clients who have existing policies, there is always a natural tendency for the client to make reference to what cover they have or had instead of what policy they require.

I try and encourage clients to almost forget what cover they have (if it transpires that it is not 100% suitable for there exact current circumstances) and plan out what is. With that in mind, make sure you plan for what you need now and don't let any existing policies shape your decision (unless your curcumstances haven't changed at all - in which case I guess you may not be looking for cover).

-Vita-

Income Protection policies , depending on the insurance provider and comprehensiveness of the cover, will continue to pay a monthly benefit typically 24 months or for an unlimited period until you were to die during the policy term, you return to employment or the policy term expires.

Depending on your exact occupation, the insurance provider may restrict the maximum expiry age for the policy to less than age 65 yrs.

PHI policies typically continue to pay the benefit until the plan expiry - age 60-65 yrs.

IP and PHI essentially provide the same cover and serve the same purpose, provided the IP policy claim period is not restricted.

Katie_H

That makes sense, thanks for your help.

Katie