Varying PHI (loss of earnings) after policy taken out?

redonion

Hi

I'm planning to take out PHI to cover me for loss of earnings if I get sick. I haven't got quotes yet, but I'm hoping "own occupation" premiums will be low enough for me to go for that.

Since these policies are a long-term proposition, I want to know what I'm getting into re changes in policy pricing and conditions once I'm in.

What guarantees are there on them not:

1. putting up the premiums?
2. making it hard to vary the details of the policy as my circumstances change over time?
3. changing the effective terms of the policy on me?

and what can I do up front to avoid problems along these lines?

I think I'm very likely to want to vary the details later -- for example:

* Designated age (of retirement / end of policy cover)
* Deferred period
* Level of cover

How easy is that going to be? Will it cost me more to change later than up-front? Is there going to be much variation between insurers in that?

For example:

* I haven't decided when I'm going to retire (I'm working on it!), so I'm likely to want to change the designated age.
* When I change employer, my ideal deferred period will likely change because the length of sick leave covered by them will likely change.
* If I start out with a low level of cover, I might decide to put it up later on. Or I might change jobs, hence pay. etc.


Also: any advice on steering clear of companies that might change the rules on you, or give you a policy that won't pay out (under the conditions I'm interested in, which is being unable to work in my current profession due to illness), or is likely to go bust? Not an easy one to answer, I know.

Thanks

ACG

1. putting up the premiums?
Get guaranteed rates and you will be fine.
2. making it hard to vary the details of the policy as my circumstances change over time?

Once the policy starts, its in force and they cant alter it.

3. changing the effective terms of the policy on me?
Once its in force, its in force.

and what can I do up front to avoid problems along these lines?

I think I'm very likely to want to vary the details later -- for example:

* Designated age (of retirement / end of policy cover)
* Deferred period
* Level of cover
Get a policy with guaranteed insurability options and you can increase the cover in certain circumstances.
You can decrease without too many problems with most insurers.

Might be worth a chat with a broker. You seem to have a good understanding of it already but it probably cant hurt to have a chat. Most mortgage or financial advisors can help.

redonion

ACG wrote: »

1. putting up the premiums?
Get guaranteed rates and you will be fine.

Thanks

2. making it hard to vary the details of the policy as my circumstances change over time?
Once the policy starts, its in force and they cant alter it.

3. changing the effective terms of the policy on me?
Once its in force, its in force.

OK, I guess that's strictly true of *any* contract, so maybe I wasn't clear. So at the risk of pointing out what's already obvious to you:

a. Contracts usually make reference to things that are not part of the contract, and those things can change (because the insurance company changes them, or for other reasons). That's the kind of thing I'm interested in here.

b. In point 2. of my question, I'm asking about changes *I* might want to make to the policy, not changes that the insurer might make. For example, they can make it hard to change the details of the policy just by wording the policy entirely up front to make it so (or by leaving those details out of the policy itself, I guess). As an insurance know-nothing I won't necessarily figure that out.

Get a policy with guaranteed insurability options and you can increase the cover in certain circumstances.
You can decrease without too many problems with most insurers.

Hmm, so it sounds like I do need to pay close attention to what I can and can't increase? Are the guaranteed insurability options fairly consistent across different insurance companies, I wonder?

ACG

http://www.friendslife.co.uk/doclib/Policy%20Summary%20of%20Income%20Protection%20Cover.pdf
Have a look at page 5 - it explains what isnt covered and can your cover be increased.
This is specifically for friends life, other companies have similar documents but generally theyre pretty similar.

The insurer basically cant change the policy once its started. the only things i think they reserve the right to change are "best dr's" and "bupa health line", which they reserve the right to pull those extra benefits. Other than that your policy is guaranteed so long as you keep up your payments.

As for increasing your cover, if you read the "can my cover be increased" section it should help. Even if you dont meet the criteria, you can just take out a top up policy.

Not all companies include the guaranteed insurability options, but the bigger providers generally do. Theyre going to be fairly similar but they may not be identical.

Hoepfully that answers it a bit better?

redonion

Thanks ACG.

I'm still eager to hear people's experiences about the cost of changing the cover (up or down) up front vs. later on.

ACG

How would you change cover upfront?

If you change your cover 5 years down the line, your 5 years older. That usually means the premium will be higher (as there is more risk for the insurer). With the Guaranteed insurability options (GIO) you have the option to increase your cover at a later date without further medical underwriting - however it will be at the rates applicable at that time (rather than the rates when you took out the original policy).

I used to be an account manager at a life office, increasing cover through the GIO was a doddle - email it through to the underwriters, they would do a manual quote and i would give it back to the advisor to speak to the client. They would then either take advantage of it or not, if they did it was just processed - no major problems. It was a standard process.

redonion

ACG wrote: »

How would you change cover upfront?

What I mean by "changing cover up-front" is this: giving the matter more thought at a time before the policy exists, and then perhaps (and as a consequence) deciding to insure myself at some level x instead of some level y.

If you change your cover 5 years down the line, your 5 years older. That usually means the premium will be higher (as there is more risk for the insurer). With the Guaranteed insurability options (GIO) you have the option to increase your cover at a later date without further medical underwriting - however it will be at the rates applicable at that time (rather than the rates when you took out the original policy).

I see -- so the extra amount I will pay is simply determined by my greater age at that future time, and not by the fact that I am already a policyholder?

I used to be an account manager at a life office, increasing cover through the GIO was a doddle - email it through to the underwriters, they would do a manual quote and i would give it back to the advisor to speak to the client. They would then either take advantage of it or not, if they did it was just processed - no major problems. It was a standard process.

Sure -- perhaps it surprises you to learn that I wasn't expecting there to be bureaucratic obstacles in the way of my giving insurance companies more money I was concerned rather with the financial effect that doing it at that time instead of now would have on me.