Income protection advice

Andrew2010

How would you rate the importance of income protection (for illness, long term illness or critical illness) and redundancy protection for somebody who is working, fit and healthy?

Would it be more worthwhile investing more of my income e.g. from 10% I invest already (excluding pension) to 20%?

Also would redundancy protection apply to somebody who's on fixed term contracts (which could either be renewed but not withh certainty)?

dunstonh

How would you rate the importance of income protection (for illness, long term illness or critical illness) and redundancy protection for somebody who is working, fit and healthy?

You have three different product types there. So, that is the first thing to note.

However, unhealthy people who have suffered claims were healthy before they had a claimable event. So, its best to take them out when they are working, fit and healthy.

Would it be more worthwhile investing more of my income e.g. from 10% I invest already (excluding pension) to 20%?

Is that with or without retirement provision?
Its difficult to answer without knowing your income and requirements. Someone earning more has the potential to save/invest more than someone earning less unless that person has increased their living standards.

Also would redundancy protection apply to somebody who's on fixed term contracts (which could either be renewed but not withh certainty)?

Normally restrictions would apply.

Andrew2010

I invest slightly less than 7% in pension, 10% savings and investments and I'm wondering whether increasing the 10% to 20% would be a better insurance than income protection for sickness/injury (long term and short term) .

Moneyadvisor

Hi Andrew,
Income Protection is in my view the single most important insurance that almost all working people should have.
Get it when young, fit and healthy and guard it with your life. People insure: Their Pets, their mobile phones, their boilers, themselfves against Identity fraud, their Lives, against Criticial Illness, their buildings AND contents when only building is manatory (assuming mortgage) and their cars fully comprehensive when only 3rd party is manatory.
The last thing that most look to insure is their income... and guess what... its the one thing that pays for everything else. It will usually have the most devastating effects if it goes, particularly long term.
Potentially for a few pounts a month you can protect this. You could potentially review other covers, prioritise and save the cost elsewhere.
If work ins't guaranteed there are policies that will allow you to take a break if you become unemployed. Your pension contributions are dependant on your income, if your income were to go long term in a few years. Ask yourself this:
Would you be saying "I'm glad I didn't take out that cover and increased my pension contributions which I can no longer afford to sustain and the pension will be pretty worthless come retirement without those contribution?"
If budget is an issue - Do you have buildings and contents insurance? do you have accidential damage on the policy? if so is spilling Red Wine on the Sofa going to threathen your lifestlye?
You have come this far, travel on and protect the most valuable Asset that you own - your income!
Once you have the cover, Its yours, they can't take it off you. You can claim on it as many times as you like.
Look for cover that has no exclusions, i.e. Will cover Stress, Anxiety, Depression, Bad Back etc etc. There will come a time when you need it, birth, divorce, "the stress of the fact that you think you are going to loose your job
Do not purchase it online. Speak to an adviser, speak to one who can provide Whole of Market Advice on this particular product and one whom you can call on if and when you need to cliam.

Andrew2010

If you keep claiming it, won't they penalise you in some way?

Moneyadvisor

No. On a real income protection policy - Its yours you are the policy owner. It will run for a certain term - say until retirement. With an own occupation definition they will pay you out if there is anything wrong with you that prevents you from doing your "Own Occupation"
If it was long term they will pay you until retirement. You can cliam as many times as you have a valid cliam and it won't affect the price.
Do not go looking for this on a price comparison site. They promote cheap dirt.
They will only cover a certain % of your income as payments are tax free but you should be able to have cover that will leave you at worst only slightly worse off than you would be if working.

Andrew2010

Thanks. You seem to suggest that I could even get cover for breaks in between fixed term work contracts?

Moneyadvisor

Not quite what I mean Andrew. With these policies you want to take it out today and keep it for a long long time. You do not want to cancel between contracts as low and behold that is when your health circumstances will change and you may not be able to get the cover again or it is too expensive. On the other hand you do not want to have to pay the preiums when you are between contracts so ideally your policy will allow you to take a break (stop paying premiums or pay reduced premiums) when you are between contracts and reinsate the cover with no new medicial underwriting required when you start a new contract.
Hope this makes sense.
see PM.

Andrew2010

Ah, I thought you meant income protection in between contracts.