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Income insurance question!
craigieboy7
Posts: 5 Forumite
Hi everyone.
Could anyone advise me on the following questions.
Can you have two different income insurance polices running at once? I have a policy which has been running for a few years now. Enough to cover my bank loan. However, i now wish to raise the amount i'm covered for and i can get a better rate from a different company. I don't want to leave myself without cover, which i would do (120 days) if i were to lose my job before the new policy kicks in.
Another question i have is does the money i'm covered for have to be allocated? i.e. a loan, credit card bill? Or can i use the money for any purpose? i.e. running my car, food. Obviously i would be paying towards my debts first!
Thanks for any replies!
Regards
Craig
Could anyone advise me on the following questions.
Can you have two different income insurance polices running at once? I have a policy which has been running for a few years now. Enough to cover my bank loan. However, i now wish to raise the amount i'm covered for and i can get a better rate from a different company. I don't want to leave myself without cover, which i would do (120 days) if i were to lose my job before the new policy kicks in.
Another question i have is does the money i'm covered for have to be allocated? i.e. a loan, credit card bill? Or can i use the money for any purpose? i.e. running my car, food. Obviously i would be paying towards my debts first!
Thanks for any replies!
Regards
Craig
0
Comments
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To answer both questions you will need to read both the application forms and the policy wordings.
Certainly some will want to know about other covers in place and will factor this in any premiums/ decision to provide cover or more basic policies will have a more broad brush stroke approach.
Most independent policies can be used on what you want. If you get a ASU policy tied to a debt (ie a loan PPI policy) then these sometimes pay the debt directly rather than yourself, particularly true with the historic PPI sold by high st banks0 -
Can you have two different income insurance polices running at once?
Usually yes. Indeed, for many people, having two is the best option (i.e. a PPI covering the first 12 months and PHI covering 12 months plus)
The limit is mainly on the amount of cover you have, not over how many policies you have. If the policy pays to you (i.e. to your bank account) it goes to the overall maximum you are allowed. If it pays directly to the debt, then it does not. For means test purposes, if it goes to the debt directly, then it is not classed as income. If it goes into your account, it is classed as income.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
You say you are not covered for 120 days, that makes it sound like you have ASU/PPI or some sort of short term income protection?
You can take out as many different policies as you like, but they can only equal a certain percentage of your income (usually around 60% of pre tax wages or upto 125% of your mortgage). As its short term income protection they may dicatate it gets paid to a Credit card etc. But in the main most will pay you directly and you can use that money to pay whichever bills you like. You need to check your policy documents.
I would also consider investigating Income Protection/PHI (long term) that will cover you until your retirement age rather than for 1 or 2 years.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Many thanks for the replies guy's!
The reason i initially took out the income insurance(BBH shelter) was as an alternative to the banks ppi! All i wanted was an amount to cover the repayments for a year, in the event of redundancy, or illness! The difference between the cover i took and the banks premium was around £60!! Due to the current economic climate, i would now like to cover my current loan and have money left to cover(as much as possible) my cost of living.
ACG, you say i can usually cover upto 60% of my pre-tax earnings. Does this mean 60% between the two policies? Or 60% on a single policy? Could i have 60% on one and say 20% on another one? In the event of a payout, is this taxable? Sorry if these are daft questions. Guess i should've looked into it better when i took out my original policy!
Again, many thanks for taking the time to reply to my post guy's!
Regards
Craig.0 -
Its fine Craig, ask away....better to get it right.
You can cover approx 60% in total. So you can do 60% with one company or 20% each with 3 different companies if you choose.
It can get a little more complicated in that some companies may cover 65% and some may cover 50%...if you were to receive 50% from the second company, the first company would not be able to pay you anything, if they did the second company would reduce the amount they pay accordingly. So if you do decide to go with more than 1 company you would need to double check that.
What happens if your off sick for more than 1 year? Have a look for income protection claim stats from the likes of LV, L&G, Aegon, Aviva, Friends Life - the average length of an income protection claim is closer to 6 years....food for thought.
The payout is not taxable, its not classed as in income as such. Its an insurance payout, in the same way if you claimed on home or car insurance any payout would not be taxable.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0
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