Income Protection Advice

misstheo

I would like to take out some income protection and wanted some advice on what may be the best plan for me. I'm aware that any advisors on here are unable to recommend specific products but I would like to know what my options are.

I'm currently employed full time as cabin crew for an airline.
My basic salary is £12000 per year. However I get paid an hourly flight pay allowance plus commission and bonuses. Therefore my monthly pay can vary.
If I get sick I am entitled to 4 weeks company sick pay (this increases after 5 years service to 26 weeks).
My contract allows for a lay off clause for business needs (rare but you never know)
There are no announced redundancies at this time.
I have a joint mortgage with my partner but he pays the majority of it.
I was a smoker, gave up 3 months ago but im aware id still be classed as smoker.

I would like to cover myself against sickness and unemployment.

Any advice as to which type of policy would be best?

Thanks in advance for any help.

ruggedtoast

There is a section on this site where Martin goes into this that you can probably find easily enough. He recommends a few companies.

Unemployment insurance is pricey. Mortgage protection a bit cheaper, however neither of them pay out for more than 6 months to a year.

Sickness cover is better value as it pays out for the rest of your life if you can't work. I am thinking of ditching my mortgage protection and replacing it with the sickness cover as I can't afford both and long term sickness could be a greater risk.

ACG

Unemployment cover you can take out and it will cover you for either 12 or 24 months depending on the policy.
You then have the choice of long term (until your retirment age) or short term (12 or 24 months) sick pay.

If you choose Short term Income Protection (sick cover), then you can take out unemployment cover on the same contract - this is known as ASU or MPPI (Not PPI).
Some companies (2 that i know of) allow you to have long term Income Protection and bolt on unemployment cover for a pretty reasonable price.
The other option is to go for Income Protection and Unemployment cover as 2 seperate policies - this is the most expensive option but it gives you the flexibility to choose from a number of different companies.

Long term Income Protection is obviously the better of the 2 in the sense that you know you wont have to worry about money before your retirement age. Choosing a 4 week deferred period and as a smoker is going to be very expensive. But you can always choose a longer deferred period if you wish, there is nothing to say it has to kick in as soon as your sick pay from work stops.
Also with regards to your wage, there is no point over insuring yourself, so its best to look at an average of how much you get over the course of the year - look back over the last year or 2 if you can and see if it works out about the same - if it does then that will give you a decent idea of how much extra you get paid.

You can only cover around 60% of your income as a maximum so just e aware of that.

However Income Protection can be quite complicated, its hard to explain it all over a forum. You are probably best seeing a Mortgage or Financial Advisor to make sure you get ti done correctly.

Hopefully ive not blown your mind away with all that above. Just let us know if ive said anything you dont understand or want anything clarifying.

Tony

misstheo

That advice was very useful and clear to understand so I thank you for providing me with your guidance.

I wasnt sure how much to insure myself with salary wise as it is variable but your idea of averaging the amount over a year is a good idea.

I'm a little torn between getting short term or long term insurance. I feel that unless I have a serious condition I don't imagine being off work for more than 12 months but I understand the value of the long term protection.

I already have a decreasing term mortgage life assurance policy. I'm thinking about having a short term accident/sickness plus seperate unemployment policy for 12 months then once I've been smoke free for a year switching to a long term/permanent to get the monthly costs down.

I will go see an IFA for further info. Thanks again for your help

ACG

This is just my opinion and not advice (as i dont know all your details) but if your going to take out cover you may aswell go for the long term one. There isnt a huge difference in price and the extra benefits you get (this varies from insurer to insurer but you can access to a nurse, rehab benefits, hospitalisation benefit etc) which you wouldnt get on short term inconme protection.

You can then tell the insurer your no longer a smoker and they can in most cases ammend your policy.
Touch wood it wont happen but could you imagine something serious happened in 5 months that kept you off work for 3-4 years?

Just my opinion though :-)

dunstonh

There is a section on this site where Martin goes into this that you can probably find easily enough. He recommends a few companies.

The income protection article on this website is a disaster. It is desperately in need of a re-write. Mainly as it fails to mention the best type of income protection and the one that should always be top of the queue to take out. The article is little more than a PPI article rather than an income protection article.

misstheo

ACG wrote: »

This is just my opinion and not advice (as i dont know all your details) but if your going to take out cover you may aswell go for the long term one. There isnt a huge difference in price and the extra benefits you get (this varies from insurer to insurer but you can access to a nurse, rehab benefits, hospitalisation benefit etc) which you wouldnt get on short term inconme protection.

You can then tell the insurer your no longer a smoker and they can in most cases ammend your policy.
Touch wood it wont happen but could you imagine something serious happened in 5 months that kept you off work for 3-4 years?

Just my opinion though :-)

I couldn't bear the thought of not being well enough to be able to work that long. I read somewhere that a lot of the long term insurance policies only pay the first 12 months for your own occupation so after that they assess you on a certain number of tasks and stop or reduce your benefit if you are able to do a set number. Then again if you were really that badly sick or injured to be off work for more than 12 months then I doubt you would be able to do those tasks anyway. My employer does try and have you work in other areas of the business if you are well enough for light duties so I think the long term policy is a better bet.

And I also agree about what dunstonh has commented about the MSE article, it was through clicking on the discussion link to the forum and reading the professionals response to the article that prompted me to do some research for which I am very grateful!

ACG

It depends on your occupation and the company. A lot of companies will do Own Occupation for the duration. An advisor will point you in the right direction of some companies.
http://www.lv.com/adviser/working-with-lv/news_detail?articleid=2339511
The average length of payout for Income Protection was 7 years with LV in 2010 and 8 years in 2009. I used to work for a different life office and theirs was roughly the same but i cant find a link to show that.

dunstonh

I read somewhere that a lot of the long term insurance policies only pay the first 12 months

That is incorrect. Those plans are short term income protection. More commonly known as payment protection or PPI and offered by general insurance companies. The long term insurance plans are typically offered by the life assurance companies and are not general insurance plans. They will pay out for as long as needed until the selected end date (which is typically around retirement)

And I also agree about what dunstonh has commented about the MSE article

[STRIKE]You are free to disagree. However, can you please point to where it discusses permanent health insurance (PHI) in the article? (PHI = long term income protection and is the best form of income protection and the one that should always be considered before the PPI version)[/STRIKE]

edit: initially misread it as disagree rather than agree - doh

misstheo

dunstonh wrote: »

That is incorrect. Those plans are short term income protection. More commonly known as payment protection or PPI and offered by general insurance companies. The long term insurance plans are typically offered by the life assurance companies and are not general insurance plans. They will pay out for as long as needed until the selected end date (which is typically around retirement)



You are free to disagree. However, can you please point to where it discusses permanent health insurance (PHI) in the article? (PHI = long term income protection and is the best form of income protection and the one that should always be considered before the PPI version)

It doesn't that's why I clicked on the forum discussion link at the bottom of the article which lead me to a Mortgage protection forum linked to the original article. It was there that I read posts from people like yourself mentioning phi as a better option. I had no idea it existed until then. Having just looked at that link to LV posted by ACG and the examples of claims some of them only a few years older than me has made me realise even more how important this type of insurance is!

Thanks for clarifying everything

opinions4u

I'd suggest considering:

PHI for longer term protection.

6 months net pay in savings for shorter term protection.

Then there's no need to chuck money at over-priced shorter term insurance products.

Get saving!