PHI or what for self employed

bs7

Hi

i've spent a while reading up on this but the more i read the more it confuses.

Permanent Health Insurance or Income Protection or Accident Sickness ... which is "best" for self employed?

I've been self employed for a couple of months now and looking to get some long overdue cover in case the worst should happen. I know 'own occupation' is a must, and will need short term and long term cover.

What do i do when it comes to guessing the income level / level of protection? I can guess but what will happen if i don't hit my target etc when it comes to a claim etc.

Any pointers where to go to get quotes; i've searched but some websites look decidedly amateurish?

Thanks very much in advance

ACG

PHI is by far the superior policy. It will cover you for a longer period of time if you were off sick, Accident/Sickness cover will only pay out for 12 or 24 months max.

They would both cover you in the event of you being off ill.

The trick here is to ensure your not over insured. There is no point paying for something you will never be able to claim on.

There are a lot of pitfalls with Income Protection - you shoudl maybe speak to a mortgage or financial advisor to get some pointers.

bs7

ACG wrote: »

PHI is by far the superior policy. It will cover you for a longer period of time if you were off sick, Accident/Sickness cover will only pay out for 12 or 24 months max.

They would both cover you in the event of you being off ill.

The trick here is to ensure your not over insured. There is no point paying for something you will never be able to claim on.

There are a lot of pitfalls with Income Protection - you shoudl maybe speak to a mortgage or financial advisor to get some pointers.

thanks for the reply.

it's bizarre but there seem to be so few options available for looking up products oneself, i take it it's only really possible to look at it via a IFA or Mortgage Advisor?

(theidol.com seem to offer products via LV and Legal General but that's about it in terms of quotes i can find)

thanks again

ACG

IP/PHI is more of a specialised product. There are so many different options to it. Its also seen as a harder sale in the industry (although i personally sell more of it than anything else) so less websites do it.

You will get more options by speaking to an advisor definately.

dunstonh

t's bizarre but there seem to be so few options available for looking up products oneself, i take it it's only really possible to look at it via a IFA or Mortgage Advisor?

Its not bizzare when you realise that quote comparison sites can offer PPI quicker and with more commission than a PHI policy. Quote comparison sites actually only offer a small range of policy types. They dont get involved with more complicated things.

bs7

dunstonh wrote: »

Its not bizzare when you realise that quote comparison sites can offer PPI quicker and with more commission than a PHI policy. Quote comparison sites actually only offer a small range of policy types. They dont get involved with more complicated things.

With respect, it seems a home insurance or car insurance quotation has more variables than a PHI policy quote ... so i'm not sure how it's any more complicated.

I note one of the policies i've seen suggests an initial commission of £271.16, then £0.38 per month after the first 48 months. Not too shabby for doing pretty much very little ... it seems there are a couple of websites that will check one or two providers and give some quotes and they will presumably be getting that sort of fee ... almost affiliate like rather than anything else.

I'm not sure how PHI is any more difficult than life assurance - the only major change is the cover provided in terms of ability to work. Even life assurance seems to be a nice earner for some firms that seem to be doing very little but able to provide the 'best' premiums by offering a set premium of £30! I honestly don't know how they get away with it, and why competition hasn't forced the price down - i can only assume there are factors keeping these sort of costs artificially high.

This forum shows that some people are very willing to give advice for free but it seems that some products are kept purposefully obscure and not advertised much at all.

Anyway - i'm off on a tangent rather than my initial query.
Thanks for reading the original post anyway.

ACG

The commission paid to companies who dont give advice is a bit rediculous.

However the commission paid to advisors whilst the same amount (roughly) is a bit different. It covers the fact that we are giving advice. If it turns out to be wrong or bad advice you have some protection for the future. WE are doing the research based on a factfind we would have conducted, not just heres the cost you choose.

It also means you dont have to pay directly for the advice, it is possible for us to take no commission but then you pay a fee instead.
Thats down to the advisor and client to discuss.

As for Income Protection, there are a LOT of variables.
Deferred period, ceasing age, amount of cover, level/increasing cover, guaranteed or reviewble premiums, what extras would you like to be included a lot of these are included in the price.

My personal opinion is that income protection (IP) should be the foundation of any protection requirements - ahead of life cover and critical illness cover in the majority of cases.

The problem is, IP is a lot harder to explain people dont understand it and dont want to. A lot of advisors just want the easy sale as life insurance is the easiest thing to explain (you die, your mortgage is paid off) thats what is more widely sold.

Its good to see you have started to look into this of your own accord, but because there is more to it and not as much interest, a lot of companies dont "waste" their time with it.

dunstonh

With respect, it seems a home insurance or car insurance quotation has more variables than a PHI policy quote ... so i'm not sure how it's any more complicated.

If you think that then I suggest you do your research again. There are masses of variables.

I note one of the policies i've seen suggests an initial commission of £271.16, then £0.38 per month after the first 48 months. Not too shabby for doing pretty much very little ... it seems there are a couple of websites that will check one or two providers and give some quotes and they will presumably be getting that sort of fee ... almost affiliate like rather than anything else.

£271 is peanuts. Especially when you compare it to 25-30% of each monthly premium for the life of the plan on PPI.

Plus, remember that many PHI policies require paper applications and are held up by underwriting and require manual processing. PPI is not underwritten and is electronic application.

I'm not sure how PHI is any more difficult than life assurance - the only major change is the cover provided in terms of ability to work.

Refer you to the answer above as I think you havent realised the differences yet.

This forum shows that some people are very willing to give advice for free but it seems that some products are kept purposefully obscure and not advertised much at all.

The forum doesnt give advice at all. Just discussion and comment. And yes, there are plenty of products available that do not appear on comparison sites. Indeed, some providers will not allow their products on comparison sites because of the issues that they can cause (high level of re-work required due to incorrect disclosure or having to deal with issues that normally an adviser would deal with and they are not geared to do it plus some see it as a race to the bottom in terms of quality and they dont want to be in that)

Even life assurance seems to be a nice earner for some firms that seem to be doing very little but able to provide the 'best' premiums by offering a set premium of £30! I honestly don't know how they get away with it, and why competition hasn't forced the price down - i can only assume there are factors keeping these sort of costs artificially high.

Price is lower than historical pricing. However, you typically only see 2 types of life assurance on the comparison sites (sometimes 3 or 4 but in small numbers). There are around 13 different types of life assurance. It is also a good reflection of the race to the bottom with some providers so focused on price that they have removed options that they used to include in their product to cut that few pence off the premium

bs7

dunstonh wrote: »

If you think that then I suggest you do your research again. There are masses of variables.

Yes, there are a few - ACG has already pointed that out - and i was merely making a point. But there are fewer variables than there are for a home insurance or car insurance quote.

£271 is peanuts. Especially when you compare it to 25-30% of each monthly premium for the life of the plan on PPI.

Plus, remember that many PHI policies require paper applications and are held up by underwriting and require manual processing. PPI is not underwritten and is electronic application.

Pretty nice earner for perhaps an hours work in total: taking details of initial remit / info on variables; searching for appropriate products (i assume with experience someone will have a good idea which products will come out the cheapest in any case); and perhaps double checking the paperwork.

This website is about moneysaving - and it's perfectly reasonable to suggest that i should look at ways of getting the premium lowered ... and one way of doing this is to find a way of reducing the commission paid. Perhaps paying an IFA a hourly rate instead of commission, i'm not sure how possible that is with PHI? Nor how much work would get done for less than the commission?

ACG wrote: »

My personal opinion is that income protection (IP) should be the foundation of any protection requirements - ahead of life cover and critical illness cover in the majority of cases.

The problem is, IP is a lot harder to explain people dont understand it and dont want to. A lot of advisors just want the easy sale as life insurance is the easiest thing to explain (you die, your mortgage is paid off) thats what is more widely sold.

I suspect one reason for the relatively limited uptake is that people don't expect to have to arrange to see an IFA/mortgage advisor for a IP/PHI policy.
You just need to look at the websites of many IFAs to immediately be put off - they all tend to look like they are only interested in financial products dealing with those with particularly high-incomes ... not simply wanting as cheap PHI cover as possible. I can see why people end up simply agreeing to the "total mortgage protection" offered by the mortgage provider.

ACG

I suspect one reason for the relatively limited uptake is that people don't expect to have to arrange to see an IFA/mortgage advisor for a IP/PHI policy.
You just need to look at the websites of many IFAs to immediately be put off - they all tend to look like they are only interested in financial products dealing with those with particularly high-incomes ... not simply wanting as cheap PHI cover as possible. I can see why people end up simply agreeing to the "total mortgage protection" offered by the mortgage provider.

Your probably correct, i have bought in leads and people have said they thought they were just going to get a quote online - frustrating to me as ive wasted £x amout, frustrating to them as they have wasted their time.
The problem is the financial industry is heavily regulated. If i cut corners know it could come back to bite me in, 1, 5, 10 or even 20+ years. There arnt many jobs where your actions now could come back to bite you so far down the line.

What your saying to some extent is true, would you go and be a gardner in an area full terraced houses or mansions if you had the choice? Your going to go where the work and money is - like any job.
Personally where i have done a lot of work for a client and earnt my wage, if i know they are working to a budget i have taken a reduced amount of commission or no commission at all on some products or sometimes just thrown in a Will for free.

The commission you see isnt the final figure we get (30% of my commission i never even see), it can also be "clawed back" for between 2 and 4 years if the policy gets cancelled - again, do you know any job where you can do work and 3 years down the line a portion of that could be taken back.

It also takes far longer than an hours work. 1 hour with the client, best prt of another hour submitting the case - researching the products, writing a letter to explain why we have sold you the policy, then if medical reports are required chasing GPs who are a nightmare as well as putting the information on our back office system.

Dont get me wrong, im not saying we should be felt sorry for or that you shouldnt see the commission and think its a lot, but there is more to it than us just going on money supermarket and selling you a policy (based on an advised sale), but like anything, the money were paid isnt our pay cheque there are a LOT of expensive outgoings before i see any of my pay.
As Dunston says £271 is nothing, after tax, NI, the amount my compliance department takes, petrol etc etc i bet i would come away with less than £150 for 4-5 hours work (thats presuming it flies straight through) - for a personal advised service where you are covered for the rest of the policy term, me being paid £150 or £270 isnt bad really - you would buy a TV for that with 1 years warranty, you have a lifetime warranty if you buy a policy off an advisor.

Also, cheapest isnt always the best or the cheapest in the long run. Reviewable premiums in the early years tend to be cheaper, but as you get older the price increases significantly.

This is the first time ive felt like i have had to justify my commission, personally id prefer to be paid a flat fee. I dont have to worry about it being clawed back then but not many customers want to pay a fee upfront because theyre getting nothing tangible for their money.

bs7

ACG wrote: »

Your probably correct, i have bought in leads and people have said they thought they were just going to get a quote online - frustrating to me as ive wasted £x amout, frustrating to them as they have wasted their time.
The problem is the financial industry is heavily regulated. If i cut corners know it could come back to bite me in, 1, 5, 10 or even 20+ years. There arnt many jobs where your actions now could come back to bite you so far down the line.

What your saying to some extent is true, would you go and be a gardner in an area full terraced houses or mansions if you had the choice? Your going to go where the work and money is - like any job.

Thanks very much for the insight.

With regards to those leads ... I suspect you're getting them off one of the dozens of websites that ask for details for a "quote" and then merely tell you someone will be in touch. It's ironic that they are allowed to get away with blatantly misleading people in order for them to get an introduction fee.

I understand your analogy with a gardener, but i suspect that there's a gap in the market for someone to market themselves for just "normal" people, earning a "normal" salary, who want financial advice and access to products.
PHI doesn't even appear to be particularly expensive, relatively speaking (the quotes i have managed to get were cheaper than I had imagined). I looked up unbiased but wasn't impressed by any of the websites: my ideal would be to email over a few details, get a few quotes back, and if going for it, just send/post the details (i realise there's potentially AML etc that'll need confirmed too etc).
But instead most seemed to be aimed at people wanting a full on proper review of their finances, a face-to-face meeting (which means time off) and they simply don't look as if they'd actually be interested in someone wanting advice on a single issue.