Income protection Insurance

Otterlie

Hi, I was wondering if anyone can help?

My husband is a self employed gardener and runs a part-time nursery business. He earns around £400 a week. He has just been advised by his bank to get some insurance to protect that income in case he breaks his leg (for example) and cannot work for a time. We don't have a mortgage but we reply on his income for weekly food shopping and petrol, school lunches etc.

Does this type of insurance have a special name? I can't find any kind of advice about it on this site (yet).
Also, if anyone has this kind of insurance - do you have any advice in how we go about finding the right policy for us? Thanks in advance!

dunstonh

Does this type of insurance have a special name?

Permanent Health insurance or PHI for short. Not to be confused with payment protection insurance (PPI).

I can't find any kind of advice about it on this site (yet).

You wont. This is not a financial services site. It dips it's toes in the water in some areas but totally ignores others. It also isnt that reliable in some of the articles in financial services. So, you shouldnt rely on it either.

do you have any advice in how we go about finding the right policy for us?

Whilst the banks do basic and expensive versions, the product is mainly retailed via IFAs. There is very little internet availability as the comparison sites prefer to focus on the easier to arrange PPI rather than the longer application process of PHI. There are also multiple levels of PHI and it is a more advanced product that PPI or life assurance. Plus PPI is more profitable and comparison sites like easy and profitable.

InsideInsurance

Income Protection is the name that arches over two products, the first is the full fat product PHI that dunstonh has already explained and its two key benefits are that it pays out until a specified date (normally your 65th birthday) and its underwritten at the point of sale so you know you have cover.

There is a more basic product called ASU (accident sickness & unemployment) which can also be bought as AS or U. This is what PPI is when its not tied to a piece of credit. It is much cheaper to buy but normally only pays out for 12 months (a few do 24) and there is no underwriting until the point of claim so something may be rejected as pre-existing etc.

Both products are clearly suitable for a minor issue like a broken leg as both would payout for long enough. If it were actually a case of losing both your legs so you'd never be able to do your job again then the PHI would pay out to the specified date where as the ASU would only pay out until you were fit enough to do A job and would cut off payments after 12 months even if you werent still fit.

This site used to promote some ASU products as the former owner is mates with a former distributor of ASU and the pair appeared on TV together bashing bankers and PPI.

PHI is pretty much only distributed via phone or in person and so not something the site can profit on from providing leads to companies so easily

Otterlie

Thank you so much dunstonh and Inside Insurance, I can begin my research with more of an idea of what I am looking for now and how to get what we need. Your replies are much appreciated!

kingstreet

When considering PHI cover look out for;-

own occupation cover - pays out if you can't do your own job. The cheaper "suited occupation"or "work tasks" definitions make it more difficult to claim

guaranteed rates - the premium stays the same throughout the life of the plan

deferred period - an initial waiting period before the benefit payments start should be tailored to how long your employer would continue to pay you your salary and/or how long you could live on your savings. The longer the deferred period, the lower the premium

policy term - as II suggested, try to run the plan until retirement age, so you don't find your benefit stopping while you're still of working age

smoker - if you smoke, some providers have the same rates for smokers as for non-smokers

occupation - many providers charge premiums based on your occupation and how "risky" it is. Others do not do this, so a manual worker may find cheaper cover from one of the specialists.

I suggest you seek out an IFA for proper advice on this cover, as picking the wrong plan can see your premiums higher and your cover of poorer quality.

moneysaver129

Have to agree that these policies - full level or simple are quite vague and potentially can prove quite poor value with many caveats and exclusions. You really need to be a lawyer to understand some of the policy implications. When one considers the implications for a family if they do not pay out and how expensive they are we need to ask if they are really insurance at all?

dunstonh

Have to agree that these policies - full level or simple are quite vague and potentially can prove quite poor value with many caveats and exclusions.

The budget plans can be very poor value for money with the exclusions they have but the comprehensive plans tend to have any issues.

When one considers the implications for a family if they do not pay out and how expensive they are we need to ask if they are really insurance at all?

That makes little sense.

weighty1_2

moneysaver129 wrote: »

Have to agree that these policies - full level or simple are quite vague and potentially can prove quite poor value with many caveats and exclusions. You really need to be a lawyer to understand some of the policy implications. When one considers the implications for a family if they do not pay out and how expensive they are we need to ask if they are really insurance at all?

Nonsense, all pure nonsense!

OP, one thing to be aware of, due to your husbands occupation he is almost certainly only going to find a decent* plan via a Friendly Society (Shepherds, Exeter Family, Holloway, Cirencester, British etc). It is standard practice for Friendly Societies to age band their premiums so that they increase with age, either yearly or 5-yearly but for more manual occupations then are often the only feasible option.

*By decent I mean one that offers an "own occupation" definition of incapacity, whether that is for the full term or even a limited term before reverting to a "suited occupation" definition after 12-24 months. As far as I'm aware no Friendly Society uses a "any occupation" or "activities of daily work" definition, which are certainly ones which you want to avoid.

Otterlie

Thank you all for your posts and suggestions - I certainly have lots to research. I now feel as if I can talk to a financial advisor without looking like too much of an idiot!

Thanks again!

ACG

Dont worry about looking like an idiot. Most people have never heard of income protection... having heard of it, its something your looking to take out - thats far from idiotic.

kingstreet

Otterlie wrote: »

Thank you all for your posts and suggestions - I certainly have lots to research. I now feel as if I can talk to a financial advisor without looking like too much of an idiot!

Thanks again!

Make sure you don't talk to someone tied to one provider.

You may end up with something unsuitable because their one provider only offers the "work tasks" definition of disability and they won't tell you if you can get better cover elsewhere.