Why people should consider protecting themselves.

homer_j_3

I have just come across this thread on another board and I think that with increasing interest rates and more indebtedness, we all should be checking whether we are fully covered.

http://forums.moneysavingexpert.com/showthread.html?t=503806

I get no joy from reading the linked post but I think it shows how reality can really smack you between the eyes when you are at least expecting it.

Income protection and mortgage protection should be compulsory in my eyes and it makes me sad when things like this happen.

wecanhelpu

I despise the insurance industry as most of the policies people are encouraged to take out are a rip-off.
I have a degree in mathematics and during my studies did many a statistical analysis of cost/risk conected to the industry.
PPI and mortgage protection are a scam designed to extract money from gullible people.

But don't take my word for it, read what an ex-insider has to say

http://www.fool.co.uk/news/your-money/insurance/2007/02/08/time-to-clean-up-this-swindle.aspx

livalicious

hi homer-j - couldnt agree with u more. My partner and I are in the process of purchasing our first property, and we wouldnt even think about doing this without Mortgage Payment protection and enough savings for the periods we not covered. I do feel for the person in the linked thread and hope that they will be able to sort something out. Bit of an eye-opener for us newbies!

homer_j_3

yes and its important as you can see, especially when you get into a financial position where you can often be replaced by cheaper labour.

There is and has been a lot of negative press around with regards to payment protection as wecanhelpyou will no doubt have countless links too.

Unfortunately, what the media and press don't tell you or show you are the many people that have successfully claimed on these policies and there is no doubt that the poster in the link posted by myself could have spent £000's over the years on this protection and never claimed and the reward may not even cover this but if it gives you some breathing space and the ability to not panic straight away.

You also have to realise income protection comes in a few formats and some will protect your mortgage payments for 12-24 months, some will protect your income until you are fit to return to work and there is protection or your living expenses and family income.

When people rent, if they fail to meet their rent, the worst to happen is that they are evicted with no real further liability. You fail to pay your mortgage, and you will be evicted and chased for the debt, costs for eviction and will no doubt go through one of the most painful/stressful events you can experience.

I wonder whether the general opinion is that of yours livalicious or that of yours wecanhelpu

homer_j_3

wecanhelpu wrote: »

I despise the insurance industry as most of the policies people are encouraged to take out are a rip-off.
I have a degree in mathematics and during my studies did many a statistical analysis of cost/risk conected to the industry.
PPI and mortgage protection are a scam designed to extract money from gullible people.

But don't take my word for it, read what an ex-insider has to say

http://www.fool.co.uk/news/your-money/insurance/2007/02/08/time-to-clean-up-this-swindle.aspx

I would be interested to hear your statistical analysis on cost/risk work. I do not feel that article says anything other than its a swindle because lenders make profit out of it? Have I missed something as I only skim read it.

dunstonh

Damn those nasty companies that make a profit. Nobody should profit from their work....

Having seen the consequences of no or insufficient cover many times, it can be heartbreaking. I dont know how many times I have heard the wife swear (literally) about the husband and that love turn to disgust because there was no life cover and after he died the wife had to go back to work, sell the house, reduce living standards etc.

To rule out all insurance because of a few plans which are not necessarily ideal is stupid. Next you will be saying you should never eat again if you get food poisoning (or even an upset stomach) or you should never see a doctor because Harold Shipman was a murderer.

wecanhelpu

homer_j wrote: »

I would be interested to hear your statistical analysis on cost/risk work. I do not feel that article says anything other than its a swindle because lenders make profit out of it? Have I missed something as I only skim read it.

Unfortunately, I no longer have my notes from 15+ years ago.

But the fact remains that the insurance industry is a very lucrative one founded on fear and misunderstanding of risk on behalf of consumers.

It is no coincidence that insurance companies are some of the wealthiest businesses around and are notorious for their skill at exploiting markets (witness the endowment and pension scandals of recent years).

Personally, I insure my car because it is a legal requirement and buildings insurance is necessary purely because the cost of rebuilding my houses is something I could not afford to do should they burn to the ground.

Apart from that, I take out the bare minimum. I have not had contents insurance for over 10 years and even though I have been burgled twice in that time, the cost of replacing my stolen goods was far lower than if I had paid the premiums over those 10 years.

it's all about understanding risk/reward at the end of the day.

homer_j_3

so average cost of b&c = £20-50 per month for pretty decent cover with accidental damage - so thats £240-£600 per year or £2400 - £6000 per decade. I can see if you only ever made small claims it would be difficult to justify this amount but I guess for me (and maybe many more in some parts of the country at the moment) - that would have been worth it 10 x over with the recent flooding?

I appreciate your comments on this and it is all down to risk assessment of the individual but what the post I linked to does show that, people that have secure jobs and have the ability to afford the odd blip in their finances (a week or 2 on SSP for example) but full blown loss of income for a lengthy period of time - what becomes more important - profit levels of insurance companies or the security and protection knowing that you are fully covered.

Once again, I don't imagine you would agree with this when thinking about yourself but you have to admit that it does provide value.

The ppi your article relates to is a short term cover, there are longer cover periods available through other policies which that does not cover.

dwsjarcmcd

I think this is a difficult one and can see both homer's view and that of wecanhelpyou. There is no doubt that particularly life assurance is vital and has represented decent value for money, particularly over the last few years since fears over AIDS have declined and competition has forced prices down.
I'm not sure the same value for money can be said about PPI, where the commission represents about 33% of the monthly premuims and in my view is overpriced, particularly for personal loans, where it is quite frankly ridiculous.

One other factor that mitigates against these being bought is increasing interest rates and affordability, which means that PPI is usually the first to go.

CLAPTON

homer_j wrote: »

yes and its important as you


.

When people rent, if they fail to meet their rent, the worst to happen is that they are evicted with no real further liability. You fail to pay your mortgage, and you will be evicted and chased for the debt, costs for eviction and will no doubt go through one of the most painful/stressful events you can experience.

I wonder whether the general opinion is that of yours livalicious or that of yours wecanhelpu

now it seems to me, if you are buying and you can't pay the mortage, unless you have negative equity you can sell the house, realise a useful sum and rent instead... how is that worse than renting and being thrown out?

Scott

Having mortgage payment protection isn't about the mathematical benefit of having the cover in place, it's about still having a house if the very worst that could do wrong does go wrong.

Just my opinion, however.