Life vs Family Income Protection

gareth_ni

Could someone detail which of the above policies would be more beneficial or indeed if both should be sought?

My wife and i are 28, healthy non-smokers, in full-time employment, soon to have a mortgage of £181000 with a term just over 20 years remaining.

Both have Life Insurance, Critical Illness and Personal Accident Insurance (I believe that my PA covers sickness also) through employee benefits at work.

We planned on stopping our joint Life Insurance plan in favour of a new one (double the monetary coverage for £5 more per month) decreasing term including terminal and critical illness. We also took out joint MPPI but I feel that the expense of this is not worth it (quotes of ~£40 each p/m to cover £1250), we have both been working for our employers long enough that I think (unless something drastically went wrong) that we would receive a suitable redundancy package or would hopefully find alternative employment quick enough.

I'm fairly familiar with Life+Critical illness but I've never really heard of Family Income protection (or PHI?) so don't know what its benefits are and whether we should possibly take this out in addition to Lif+Critical illness, I gather that its like MPPI but doesnt pay out when unemployed and that you are not necessarily limited to short-term payout. Can someone advise of any further pro's and con's and based on any detail I've provided above what would possibly benefit us?

kingstreet

Family income benefit is just life cover paid in instalments, rather than a lump sum, so it's cheaper as it's effectively decreasing cover.

Permanent health insurance, or income protection, pays you a monthly benefit if you can't work due to illness or injury. The better plans are based on "own occupation" so you get a payout if you can't do your own job. The premium is based on your age, the cover, your job and the deferred period before payment start. If your employer pays you for six months, you can have your benefit start from then and it makes the premium lower than it would be for a shorter period.

Benefit is paid free of income tax and NI and is paid until you retire, the end of the plan, or until you are fit enough to work whichever comes first. You can make multiple claims over the term of the contract too.

I like PHI/IP and more people should have it!

dunstonh

Could someone detail which of the above policies would be more beneficial or indeed if both should be sought?

Both are beneficial in their respective objectives. Family income benefit (FIB) is not as popular as it used to be. In part because of simplification of the market (there were over 15 types of life assurance when I started. Now you only really look at a handful). Quote comparison sites show even less as they really look to simplify options.

I gather that its like MPPI but doesnt pay out when unemployed and that you are not necessarily limited to short-term payout.

Nothing like MPPI. FIB is a life assurance that pays a monthly benefit instead of a lump sum. e.g. if you have 20 year FIB of £40,000 a year and die in year 5, it will pay out £3333.33pm for another 15 years. If you die in the early part of the term it can pay out a lot. If you died with just 6 months to go then it would only pay out 6 lots of £3333.33.

Generically, FIB is cheaper than level term assurances.

gareth_ni

Thank you both for your replies.

Perhaps its PHI that im think of then rather than FIB, definately want Life Insurance as I prefer the thought of the mortgage being satisfied in a lump sum should something happen.

For PHI are there any comparison sites that I can attain quotes just to get a feeling for facts/figures, or can these only be attained from an IFA? Can critical illness also be paired with PHI? If yes, is it better to pair CI with Life or PHI?

Thanks again.

kingstreet

Normally, life and critical illness cover are paired together, so the contract pays out if you get one of the listed illnesses upto the required severity, or if you die.

You can take separate PHI with the same provider, or another. Pick the best contract for the price.

Alternatively, you can go for a "menu" plan which allows you to combine different strands of cover, life & CI, PHI etc.

For what you are looking for, I really would speak to an IFA. Budget versions of CI and PHI could leave you unable to claim while still paying higher premiums than you might have got going the "advised" route.

One of our members on here is an IFA in NI, perhaps he can help...