Ill health, employment insurance settlement offer. Advice needed!

Monkey£

Hi,
This is my 1st every post but I have viewed the forums many times. I am really hoping somebody can help me please.
It's a long story...
6 years ago I was diagnosed with heart disease which I developed as a result of pregnancy. I was 31 years old at the time. With ongoing medication I have made good progress & I'm fairly stable. However, I am unable to return to work & this is unlikely to improve.
For 4 years I have been claiming on my employers insurance which pays me ~£18,000 per year with annual inflation rises. This cover is in place until retirement age.
The insurer has recently offered me a full & final settlement for the claim of £88,000.
Having done some sums, the claim would cost the insurer over £500,000 by retirement age. My life expectancy is 15-20 years so I may not make retirement age.
I am quite keen to take a settlement as periodically the insurers question my claim & the process of continually proving my condition is stressful & exhausting.
So I have a few questions that I'm hoping somebody can assist me with..
1) how strong is my position to negotiate? How should I go about this? (I do not have any direct link to the insurer, it all goes through my employer).
2) what kind of sum is realistic?
3) would the sum be taxable? (I currently pay tax & NI on my monthly income from them)
4) I also have a private policy with a different insurer, would this monthly payment be affected?

I feel that if the sum was enough to pay off my mortgage I could accept the pay off but if I am still paying a mortgage I'd be worse off each month.
My mortgage stands at ~£200,000 with monthly payments of £1,250.
Currently I get £1,250 (after tax) from this policy.

I'd appreciate any advice you can give,
Thank you.

MaggieBaking

Monkey what a dreadful situation to find yourself in. I'm sorry I have no experience but giving this a little bump to the top of the page for you.

Sounds like you might need a bit of legal advice? Perhaps a solicitor could help you get a better settlement?

*Scarlett

I agree that you need to get proper legal / financial advice about this.

Clearly the insurer will not want to pay possibly £500k so will want to push you for a settlement but it does not mean that you have to accept the first offer.

£18k a year is a lot of money for most people but if the process of proving the claim is adversely affecting you then you may want to settle if it is financially viable. Are you concerned that the insurer / employer may try to revoke the cover in the future?

I do think that you need to get professional advice on the policy.

Quentin

Maybe consider concentrating on the issue of the stressful and exhausting process they keep putting you through rather than any consideration to their pitiful offer!

See if your doctor can help - explain what you have told us and he/she may be able to write to the insurer a more definitive letter regarding your condition's prognosis - or get some legal advice on how you can stop your insurer stressing/exhausting you over proving your ill health.

InsideInsurance

Monkey£ wrote: »

I am unable to return to work & this is unlikely to improve.

As per this, there is uncertainty and therefore the insurers will want to periodically review your case to ensure you are still unfit. Presumably these reviews are about annual?

I am not an expert on PHI so its a bit of a pity that none of the IFAs have chipped in with a more educated answer. To the best of my knowledge, though check your policy wording to make sure, there is no contractual right for the insurer to do a full and final settlement so to be able to do this both sides must fully agree.

If you aren't happy with their offer come back with a counter offer. I would argue that paying a solicitor for advice would seem excessive but may be relevant if on reading your policies terms that it suggests that there is a clause that enables the insurer to force a settlement.

Monkey£

Thanks for all of your responses so far.
I am meeting with my financial adviser on Monday to see what help he can offer me.
Unfortunately I do not have a copy of the policy as it is taken out by my employer so I do not have any direct contact with the insurance provider.
I think my only option is to try to negotiate a much higher pay out and if that is unsuccessful I'll have to decline a settlement and continue as I am now.

Thanks all, I'll let you know how things progress...

vaio

couple of other things to consider.......

As it looks like you are notionally still employed then do you have death in service benefit as well? Will that be affected if you take the pay off?

Is the ongoing £18k a year secure? Does it stop if your employer goes bust for example?

More generally, I agree 110% with Quentin's post #4 and would certainly pursue that. Whilst the insurer has a right (even obligation) to review your claim they also have a duty to do it in a way that doesn't cause you any ill effects. Frankly I can't see any reason why anything more than an annual letter to your doctor asking "any change?" is needed.

As for the £88k, that looks like a joke. One way off assessing it's value would be to look at annuity rates, ie how much money you would have to give an insurer now for them to give you £18k a year index linked for the rest of your life.

I don't know how your heart disease will affect your life span, hopefully not at all but taking a really bad example and assuming you now have the same life expectancy as a 75 year old then looking at http://www.hl.co.uk/pensions/annuities/annuity-best-buy-rates you'd have to give them £327k to get an annuity that would pay £18k RPI linked.. If you were equivalent to a 55 year old then the figure goes up to £735k to get your £18k pa.

Get proper advice and I'd double check by talking to more than one firm

Monkey£

Thanks Vaio, you have raised some good points.
I do have death in service cover & hadn't even considered this so I'm really grateful you pointed it out.
The £18k per year is reasonably secure but it seems periodically the insurer does their best to wriggle out of the claim. 2 years ago they challenged the claim for no reason (nothing at all had changed) which resulted in several strong letters from my cardiologist & after a very stressful few weeks (worrying about how we'd pay the mortgage) they reinstated the claim & haven't challenged it since. It is a worry in the back of my mind regularly that they may try to do this again. If the claim runs it's course I am covered until retirement age (60) although I may only live until 50-55 worst case scenario. I am currently 37.
When everything is running smoothly the insurer sends a nurse to my home every 6-12 months for an assessment.
The company I am employed by is a very successful global company so risk of them going bust is minimal.
Thank you all for your advice, I really am very grateful.