Am I paying too much for mortgage and income protection?

puddles

I've been blindly paying the same for years and even renewed again in January when the consultant came round to see us. Only today did I think about it and wonder if I'm paying too much.

We currently pay:

£105/month for life or critical illness mortgage cover
Amount payable: £167,780
Term: 23 years

£23.57/month income protection for illness/injury
Amount payable: £182/week maximum

£52.26/month for 2nd income protection for illness/injury policy
Amount payable: £1,122/month

Our mortgage payments are £800/month.

So, am I paying too much? Thanks for any help and advice.

OshayAway

Impossible to say without having your ages & smoker status. Not to mention more details about the cover.

marathonic

There's no way of anyone knowing without knowing a hell of a lot more information.

Things like children make a big difference to the level of cover you need. Also, if one person is on a significantly higher salary that the other, it MAY be sufficient to just have income protection for the higher salary (and that's a big MAY ).

Assuming the correct level of cover is in place, the IFA's here will be able to tell you whether you're paying way over the top. When you say 'your consultant', what do you mean? Is this a bank advisor or an IFA or what?

puddles

Sorry, more info.

The income protection is just for myself, both of them. I am 38, non smoker with annual salary of £43,000. Both policies pay out after 3 months.

My wife is 32 and a non smoker.

What sort of information would you require about the policies? Thanks so much for the feedback so far.

marathonic

With that level of premiums on a monthly basis, you're probably best to see an IFA if you don't feel confident enough to do the research yourself.

How to proceed all depends on the terms of your policies. For example, the definitions of illness and/or injury may be different for each of the two income protection policies. The critical illness definitions for your mortgage protection policy may also be more favourable than what's available on the market today - meaning that, although cheaper premiums are available today, you may be better sticking with the old policy.

An IFA would be able to identify which is the better of the two Income Protection policies and determine whether it would be possible, or advisable, to cancel one and increase the other - this depends on the flexibility of the policies as well.

puddles

Thanks - the guy I saw was employed by the insurance company.

marathonic

Just for the record, the cheapest method is, obviously, the direct route: provided you do the required research and select the correct products.

This would involve getting quotes for policies from the likes of http://moneyworld.com/Life-Insurance/index.htm and, with those quotes to hand, taking a printout of the policy being offered in order to compare it to your current policies.

For example, you might start with the mortgage protection policy. The life portion is pretty straightforward but the critical illness portion is where it gets more complicated.

You need to list out the most common critical illnesses, or the ones that you fear most, and compare the definitions of those illnesses between your policy and the policies offered by the companies providing quotes above. Only then can you decide whether you are paying too much for your current policy.

marathonic

puddles wrote: »

Thanks - the guy I saw was employed by the insurance company.

In that case, you're pretty much guaranteed to be paying too much. Either do your own research or else go to an IFA that can offer products from a wide range of companies as opposed to being tied to just a single company.

The fact that you're paying higher premiums could end up to be the least of your worries if you come to claim and find that your policy doesn't pay out whilst other policies on the market would have.

kingstreet

Why do you have two income protection plans? Are you sure both will pay out at the same time, as often if they exceed the maximum benefit, they will top-out at that and no more?

Are they both set up on an "own occupation" basis? Sometimes salesmen use work tasks, or activities of daily work to get the premiums lower, drastically reducing your chances of a payout in the event of a claim.

Did you use guaranteed rates for your cover? This means the premiums remain the same for the whole term. Salesmen again use reviewable rates to get the initial premiums lower, when these can be a lot higher later on.

Your critical illness cover may have very good definitions, it may have poor ones and few of them. The better contracts today cover as many as 40 illnesses and offer part-payments for less severe cases. Conversely, older contracts can have softer definitions which pay out on a less severe condition. Have a look here to see if your plan has a star rating;-

http://www.defaqto.com/star-ratings/critical-illness-cover

Your income protection may also have a start rating;-

http://www.defaqto.com/star-ratings/income-protection

weighty1_2

In regards to the critical illness cover, it is very much dependent whether the plan is a level term plan or decreasing term one. For the former the premiums are pretty much on the money, however, for a decreasing plan it appears somewhat overpriced, depending on whether there were any underwriting issues which affected the standard terms/premium being offered.

I do think you are pretty well covered and it is nice to see someone with both income protection AND critical illness cover.

With regards to the income protection, you shouldn't be overinsured as the total benefit is still less than 50% of your gross salary. I am however intrigued by why you recorded one benefit as £/week and the other as £/month. Are they with different providers and if so are they set up with the same retirement age, indexation option, guaranteed/reviewable premiums etc. etc.