PHI and redundancy cover: never the twain shall meet

redonion

There are no policies that have any form of redundancy cover that also comprehensively cover loss of earnings due to illness (by comprehensive, I mean in any way at all comparable to PHI). So I while I'm shopping around for PHI, I'm ignoring ASU completely. Am I right? Or could I be making a mistake there?

I don't know whether I'll judge redundancy cover as worthwhile for me, but I would really like to know whether by ignoring it completely while shopping around for PHI I might be missing out on some sort of combined PHI / ASU deal that could save me a lot if I do end up buying ASU?

Thanks

ACG

There are 2 companies i know of that do it.
One is nationwide, the other is Liverpool Victoria.

LV is only available via brokers. Nationwide is only available at...nationwide branches.

dunstonh

There are no policies that have any form of redundancy cover that also comprehensively cover loss of earnings due to illness (by comprehensive, I mean in any way at all comparable to PHI).

In addition to those above, I believe Pru have an unemployment bolt on to their PHI policy.

So I while I'm shopping around for PHI, I'm ignoring ASU completely. Am I right? Or could I be making a mistake there?

Sometimes it can be best to do an ASU and a PHI with a 12 month deferment.

kingstreet

Why not look at PHI with stand-alone unemployment cover and compare it with Scot Prov's self-assurance mortgage plan or (I think ACG is referring to) LV's "Mimi", where you can combine life, critical illness, income protection and unemployment cover in one plan?

ACG

Mimi? Not come across that before.
Im talking about the Mortgage & Lifestyle protection plan. Its just PHI with the option to bolt on unemployment cover. It doesnt include CI as an option.

kingstreet

TBH I haven't used LV for ages. Mimi is/was the menu protection plan which may now have been renamed Flexible Protection Plan or Mortgage & Lifestyle Protection.

Although it seems neither of the two new contracts had as many options as Mimi had.

ACG

Ah, im on a panel. We dont get LVs menu plan, just their Mortgage & Lifestyle protection - which im quite a fan of. At one point i was selling a fair few of these policies.

kingstreet

dunston makes a good point.

Depending on the occupation class and how long employer payments would continue, you can compare;-

ASU + PHI (52 weeks deferred) for short employer payments and occupation class 3+

with

U + PHI (deferred period to match employer payments) for occupation class 1/2.

redonion

dunstonh wrote: »

Sometimes it can be best to do an ASU and a PHI with a 12 month deferment.

I'm nervous that an ASU might end up not paying out where PHI would, and I'd be left with nothing for 12 months. Might it make sense to do 3 or 6 month PHI + ASU, or is that likely to be more dominated by some other option (i.e. something else is both cheaper and just as good)?

redonion

kingstreet wrote: »

dunston makes a good point.

Depending on the occupation class and how long employer payments would continue, you can compare;-

ASU + PHI (52 weeks deferred) for short employer payments and occupation class 3+

with

U + PHI (deferred period to match employer payments) for occupation class 1/2.

That's interesting: Why is this likely to be a good trade-off? Because ASU is *always* cheaper than short-deferrment PHI , so ASU + 52 PHI gives you cover at reasonable cost if you're a higher risk customer? Or because that option is likely better *and* cheaper if you're in that group? (personally I'm occupation class 1. with short employer payments)

I'm now wondering what the fundamental reasons are that ASU can cover the early period cost-effectively and PHI cannot? It seems to me that makes a difference because it will affect whether the combined policies are any good. Is it:

1. a big chunk of claims are in the early period

or

2. ASU pays out less often

or

3. once people start receiving PHI, they're likely to carry on, whereas if they don't, they're more likely to pull their socks up and get back into work?

All are plausible, and perhaps part of the explanation, but in my experience when I find somebody who really understands something like this, I discover I'm wrong...

kingstreet

If you are in a class four-type manual occupation, short deferred periods make the cover very expensive, when you link them with the best "own occupation" definition of disability.

So, you can combine the A&S bit of ASU cover to provide the first twelve months benefit with a 52 week deferred PHI. This may result in a total monthly premium which is lower than the short-deferred PHI option, plus the stand-alone unemployment cover.

TBH there is no hard and fast rule. You sit and work out the best premium combination for the client you are working for, then take into account any limitations in the approach so you can maximise the chance of a payout.

Ordinarily, I'd like the shortest possible deferred period on the PHI as I feel it's a more trustworthy contract, but sometimes you have to put the cost first. Client's priorities are paramount.