Income Protection Insurance - Can they cancel it at any time?

The_Maestro

Hi,

I had a Barclaycard Lifestyle plan which was supposed to pay £2000 per month if I was made redundant and also paid £250 for life events such as having a child. Now, I just phoned them after the birth of my daughter to claim £250 to find that they cancelled it late last year. I must have missed the letter because I was working abroad for a few months and I didn't notice the direct debits had stopped.

Anyway, this leads me to think that Income Protection Insurance is a complete waste of time because presumably if the country's economic and job prospects are not looking so rosy they can just pre-emptively cancel policies. So they collect people's premiums in the good times and cancel the policies when they see bad times ahead - its pretty clear that if they have this ability, they WILL do that. They could even target individuals or groups that they may see as being in professions at risk in the future and cancel their policies.
They even told me on the phone that it was cancelled because they did a financial assessment of the product and decided to cancel it, however looking at their website, it does say that the product is closed to new customers but that existing customers are not affected, so its clear they didn't cancel everyones.

Do all Income Protection policies allow the insurer to cancel the policy at any time with 30 days notice and if so is there really any point in them?

dunstonh

Income protection, as in permanent health insurance, cannot be cancelled by the provider. However, what you describe is not income protection.

Payment protection can be withdrawn by the provider as can most general insurance policies.

i already answered your near duplicate thread. However, for the benefit of those reading this one without knowledge of the other, they need to be aware that the provider wrote to you over a year ago but mail was returned and you admit you were out of country at the time. Plus, premiums were not paid from that point. So, its not as if you should have been unaware as you were not making the monthly payments.

The_Maestro

dunstonh wrote: »

Income protection, as in permanent health insurance, cannot be cancelled by the provider. However, what you describe is not income protection.

Payment protection can be withdrawn by the provider as can most general insurance policies.

i already answered your near duplicate thread. However, for the benefit of those reading this one without knowledge of the other, they need to be aware that the provider wrote to you over a year ago but mail was returned and you admit you were out of country at the time. Plus, premiums were not paid from that point. So, its not as if you should have been unaware as you were not making the monthly payments.

Hi, how does not receiving their cancellation letter have any bearing on the points I made? Sure, its not ideal but it pretty easy to miss one letter in any circumstance. What do you mean, I 'admit' I was out of the country - is that illegal or something now?

This thread was to ask if all Income Protection Insurance policies can be cancelled in this way, and you answered that so thanks.

So I am still unclear on what I have, you say its not Income Protection Insurance, and its not PPI because its not linked to a CC or loan. So what on earth is is?

If it is PPI, how on earth was it not mis-sold when I didn't even have any payments I wanted to protect???

InsideInsurance

It sounds like an Accident Sickness and Unemployment (ASU) policy which is the same as PPI other than its not linked to some form of credit. Reading whats left of the Barclays website about the product though it does suggest that it was mainly at least PPI on Barclaycard

ASU is a budget/ low quality product that is one of the reasons why we hear so many complaints about PPI (plus its selling methods). It tends to act much more closely to general insurance (eg home, car, pet etc) than long term insurance (life, PHI, CI) and often will have cancellation clauses for the insurer to exit the policy.

Ultimately, dig out your policy schedule/ wording and check what it says about cancellations.

weighty1_2

There are various forms of income protection on the market. "True" income protection was originally called Permanent Health Insurance and provides an income in the event of long term ill health/injury which results in a loss of income.

What you had would either have been classed as Mortgage Payment Protection Insurance or Accident, Sickness and Unemployment cover, both of which are forms of PPI, just regular payment ones, unlike the often missold single premium PPI attached to loans by the banks.

Both the MPPI and ASU cover are normally annually reviewable/renewable policies which the provider does retain the right to cancel should they wish to do so, so that is not unusual at all.

In regards to you working abroad, many of these types of plans have a condition which states you must be living and working permanently in the UK, which i think is the point Dunstonh may be getting at.

The_Maestro

weighty1 wrote: »

There are various forms of income protection on the market. "True" income protection was originally called Permanent Health Insurance and provides an income in the event of long term ill health/injury which results in a loss of income.

What you had would either have been classed as Mortgage Payment Protection Insurance or Accident, Sickness and Unemployment cover, both of which are forms of PPI, just regular payment ones, unlike the often missold single premium PPI attached to loans by the banks.

Both the MPPI and ASU cover are normally annually reviewable/renewable policies which the provider does retain the right to cancel should they wish to do so, so that is not unusual at all.

In regards to you working abroad, many of these types of plans have a condition which states you must be living and working permanently in the UK, which i think is the point Dunstonh may be getting at.

Hi, as both of you said about ASU, that does sound feasible. The small print does say that they can cancel if they give 30 days notice. So does that mean no come back? I know that terms and conditions small print doesn't necessarily hold any weight if it breached some regulatory rules which I would have thought this should because its not fit for purpose in quite a cynical way in my opinion. But if not I'll just have to suck it up I guess.

I think the Barclaycard policy said that the policy holder had to be UK resident, it didn't say anything about working abroad for a few months. I was UK resident the whole time and paid by a UK company (I had to check that for tax reasons when doing my return so I was quite sure it wouldnt invalidate the policy).

So, is ASU still sold and if so how can I avoid it? One reason I ask is because when I went on a price comparison site just now (money supermarket) and did their search for redundancy insurance, the premiums were actually a lot lower than I was paying to Barclaycard. Even the highest ones were coming in at around £50 pm and I was paying Barclaycard £83 and that was one of the lowest at the time I took it out. So if the ASU I had was 'low quality' I am guessing the ones I see on price comparison sites now are no good either? What I really want is cover for unemployment for 12 months but one that they can't just cancel, and I also want the classic PHI that would cover until retirement in the event I couldn't work due to illness. When I search for PHI on the internet I see very few references to it, its all 'Income Protection Insurance' which I guess covers crap like ASU and good policies too?

Thanks for you help.

InsideInsurance

PHI covers the AS aspect of ASU, some allow you to tag on a small unemployment section but really they are about you being medically unable to work.

One of the key differences is that PHI pays out until a specified date, normally you 65th birthday where as AS(U) only pays out for 12 or occasionally 24 months. Secondly the product is underwritten when you buy it so you know you have cover where as with ASU terms arent checked etc until the point of claim.

The ASU sold by the bank, like most referred insurances, is often an OK product (within the scope of what the product is) but very much over priced.

There are plenty of independent providers of ASU, this site used to promote British Insurance but then the former owner of both companies were mates and were on TV attacking banks for PPI.

Product isnt better quality but at least the price is more reasonable.

weighty1_2

As InsideInsurance states, you probably won't find a better policy online, just a more reasonably priced one. Without checking every Policy Wording booklet out there, I'd expect the right to terminate the contract by the insurer is written into every contract.

The policies are fit for purpose, however, the insurer still has to be mindful of maintaining it's solvency during difficult economic times. If it knows that a sector of industry is about to shrink dramatically then it has every right to cancel those plans to protect the other policyholders who do not present such a great risk. Take into account they only normally take these measures when an industry sector is already seriously in decline and they have already paid out lots of claims.

The_Maestro

Ok, thank you both. I don't entirely agree because I don't think its really insurance if they can cancel it at any time and in particular are most likely to cancel it when you are most likely to need it in the nearish future but are happy to keep taking premiums when there is little chance of them having to pay any claims. I am glad you explained it all. I also think its particularly cynical that they said they covered 'life events' like the birth of a child and someone could be paying the premiums for 9 months, being loyal and not switching to another product expecting to get the £250 back when the baby is born but they can cancel it just before. It seems that's exactly the reason they cover the life events to get the customer loyalty and not to provide any sort of insurance or safety net at all.

Thankfully I am not massively affected except for not getting the £250 and having to take another policy with another waiting period if I can find one that is good value enough knowing what I now know!

dunstonh

Thankfully I am not massively affected except for not getting the £250

How much have you saved for not paying the premiums for 12 or so months?

The_Maestro

dunstonh wrote: »

How much have you saved for not paying the premiums for 12 or so months?

Good point, and I would have saved even more if I never fell for it in the first place! Come to think of it maybe I will cancel my car and home insurance because I never claimed on them in years.

Thinking about it even more, I had to tell them which company I worked for and it would be a simple matter for them to cancel the policy if my company ever announced redundancies because they always announce them more than 30 days before they actually make them. So I guess the moral of this thread is don't pay much for ASU! I might justify £20 a month on it