Diary to log my planning/quotes for Protection Insurance for our family

mae

I hope its ok if I use this as a sort of diary/log to get me on track to getting protective insurance in place?

The basics are we are a family 2 adults 2 children. We are both in employment, husband full time, me part time we have no debt except our mortgage and basically we are nowhere near protected financially if anything goes wrong. There are alot of things we are just letting drift and we need to focus on them ie

1. We need to get Critical Illness cover or Income Protection.
2. Check when our Life Insurance deal ends and up the amount and renew.
3. We need to check we have the correct pensions and how they are performing.
4. Look at our Endowment and decide whether to just carry that on or cash it.
5. Update our Wills

So I would like to use this diary to log the process and decision making re the CI/IP/Life Insurance and then I will move onto the other relevant boards to work my way down the list.

So this is where we are at:

Mortgage £101K Interest Only but we overpay - House Value £250K
Endowment £29K but not on target will find out details of this and update (we pay £40.32 into this per month).

Income OH (age 50) - £1850 (4 weekly after tax)
Income ME (age 40) - £689 (monthly after tax)

All we have in place at the moment is Life Insurance for £100K which I don't think is enough and it was taken out for 15 years and I think is due to end shortly so I will check that out. We pay £15.40 per mth for this.

I have read Martins article re Critical Illness and he is more in favour of Income Protection and has also changed my mind as originally I thought all we needed was CI and now I am swaying towards IP and I guess it would be more sensible to get a plan that would pay out until retirement.

Neither employer would pay us if we were on sick so its important that we sort this soon and stop talking about it and procrastinating.

Quick question/decision before I go looking at quotes is how much of our wages would we need to replace if we were off sick? The truth is that OH's wages covers all the necessities and my wage is more luxury money so we are really looking at only needing to replace his monthly wage rather than mine. Is it usual to quote for the full wage replacement? Mmmm

I'll update with quotes on here so I can compare before making a final decisions. Any advice and recommendations and criticisms of policies/quotes along the way would be most welcome as its a mine field (hence the procrastination for so long).

dunstonh

1. We need to get Critical Illness cover or Income Protection.

or both. Or even all three if you include the different types of income protection. Some people are better suited to having both types of income protection.

have read Martins article re Critical Illness and he is more in favour of Income Protection and has also changed my mind as originally I thought all we needed was CI and now I am swaying towards IP and I guess it would be more sensible to get a plan that would pay out until retirement.

Which is surprising as Martin doesnt actually have an article on income protection. You would think that if he prefers PHI to CI (and there are good reasons why that can be the case if you cannot afford both) that there would be an article on it.

That said, you should not let Martin change your mind. He doesnt know your financial needs and circumstances. How would you feel if you had a critical illness and didnt have the policy to pay out?

Quick question/decision before I go looking at quotes is how much of our wages would we need to replace if we were off sick?

Small snag is that income protection has very little coverage on the internet. It is still a product that is mostly arranged by IFAs. The internet has focused on payment protection as its is easier to sell and put in place than PHI.

Typically you look for around 66%. However, you may have budget constraints or your financial need may be that you dont need to take the full amount.

Any advice and recommendations and criticisms of policies/quotes along the way would be most welcome as its a mine field (hence the procrastination for so long).

The board is not regulated to give advice or recommendations. We can criticise, discuss and comment though. And we will

My expectation at the moment is that you will go looking for income protection and come back telling us about payment protection instead (some of which pretend to be income protection). Although, now that I have said that, maybe you wont!

mae

Hi Dunstonh

Thank you for that because I have learnt alot aready haha embarrassingly I don't know the difference between Income Protect and Payment Protection that you talk of ??

That's what I am wanting to get from this diary knowledge along with my wider research.

This is what Martins article says about CI which led me to the conclusion of researching Income Protection instead:

Does this logic apply to critical illness policies too?

We're not big fans of critical illness policies. Many believe they will pay out if you get any serious illness and can't work. Yet that isn't true, critical or serious illness policies pay out a lump sum if you get a specific illness as defined by the terms of the policy; for example losing one leg isn't critical, but two legs is! So don't think "I'm covered for cancer", most policies only cover a limited range of cancers.

Picking a good critical or serious illness policy would take a doctor and financial nerd combined; so one option is to get the level term cover and an income protection policy - which does just that - protects your income from a range of eventualities. If you want critical illness though, speak to an advisor.

mae

I am just looking on Cavendish website at Income Protection and that says the max is 60% of Gross Income and I think that is what we need to cover on OH as he is the main earner and I am thinking we don't need to cover me as we would not be in a bad situation if I could not work just a need to cut back and be more careful and money aware rather than in danger of not being able to pay bills.

mae

Ok got some quotes for IP with a 13 week deferment from Cavendish (£35 fee)

Liverpool Victoria - Benefit £1718 -Guaranteed- £53.91 or Reviewable - £47.49

Unum - Benefit £1562 - Reviewable - £44.33

PruProtect - Benefit £1562 - Guaranteed - £79.01

I'm assuming 'Guaranteed' would be a better policy so that premiums won't go up? Any opinions?

The only thing I am not sure about these policies is how long they would pay out for so I am just going to make a quick call to Cavendish now and I will update this post once I know.

Edit to add..Just rang Cavendish and the LV policy only pays out for 24 mths and they told me to check the Key Facts on each quote to check how long they pay for but they don't have an option to select pay out til retirement. So I looked at Pru Healths key facts and couldn't find how long the pay out for so I gave them a call and have been put through to someone who is ringing me back to go through a quote with me...gosh no wonder I procrastinate on this its a minefield and takes up time...but I will see it through this time!

lisyloo

Do check what you both have provided at work.
Some employers do cover PHI.
PHI pays out until retirement, death or return to work, but you should obviously check in each cases what cover they offer.

mae

Hi Lisyloo neither of our employers cover PHI I know that because others have been off sick and are on statutory sick pay.

dunstonh

PHI also comes with budget, standard and comprehensive plans. Although most providers dont clearly identify their products as such. So, price should not be the key driver. The providers plans differ a lot on what they offer. Guaranteed premiums mean the provider cannot increase the premiums in future. Reviewable allows them to do so on various anniversary points if they feel they under priced the risk.

Some of the best PHI plans are offered by the friendly societies rather than the main life assurance companies. You may not find their products on internet comparison lists.

mae

Anyone got any comments re PruProtect? I'm just awaiting a call back for a quote I've just been through over the phone with them.

mae

dunstonh wrote: »

Some of the best PHI plans are offered by the friendly societies rather than the main life assurance companies. You may not find their products on internet comparison lists.

Who are the friendly societies? Remember you are talking to a complete novice here

mae

Ok so I got a call from PruProtects agents re what I said above.

Quoted

£104.04 for IP up to age 65 for £1500 of cover per mth with a 3 mth deferment.
or
£68.85 for IP to age 60 for the same as above.

She also quoted me for (I didn't ask) Whole of Life Insurance...100K for £63 for OH and £31.44 for me...That seems expensive but I suppose it is a different type of life insurance..won't be having that though! We are only paying £15 for Life Insurance at the moment and although I know we will have to pay more than that when we renew it I don't want that much of a jump.