Income protection - Not sure whether to get it?

ACG

Of all the insurances I sell, I only have income protection.
I have Asthma, but aside from that I have never had more than 2-3 days off work with a cold (a bad cold, im not just being mard).

You might get to the end of the term and not make a claim. You might take a policy out and make a claim the next week, nobody knows and that is why you have insurance.

Someone said they put an amount away each month - great. But if you are putting away £500 a month, it would take you 12 months to put away £6k. The average income protection policy pays out for around 6-7 years, so it would take you 6-7 years to put away enough to cover you for the average claim. If you are putting away £250 a month, it would take you 12-14 years...

There are ways to get the premiums down, delay the deferred period for example.

It makes no odds to me if you take out a policy, it is easy to say no as you are superman but the reality is nobody really knows and for the sake of £30 a month which you are not going to feel massively it will keep a roof over your head if the worst happens. Have a think about it, if you are happy to take the risk go for it, but dont dismiss it outright without having a think about worse case scenarios.

SuboJvR

Income protection would be one I would buy as well, though this is thankfully a benefit of my employer so this is definitely worth checking. We do also have life insurance each, I feel more of a responsibility for this as the main wage earner though.

ProDave

Nobody has said this yet, but isn't this PPI under a new name?

I avoided PPI. I always refused it believing I was financially savy enough to take care of my own finances. Oh how I wish I had accepted PPI. I would now be reaping the benefit with a "compensation" payment of many times the PPI fees I had paid. It would after all have been a very sound "investment" if only I had known.

kingstreet

ProDave wrote: »

Nobody has said this yet, but isn't this PPI under a new name?

No. This is a long-term product, usually bought via the full ICOB advice process, underwritten at point of sale with monthly premiums.

As far as PPI is concerned, 'victims' are receiving a refund of the premiums they paid and statutory interest at 8% per annum.

ProDave

kingstreet wrote: »

No. This is a long-term product, usually bought via the full ICOB advice process, underwritten at point of sale with monthly premiums.

As far as PPI is concerned, 'victims' are receiving a refund of the premiums they paid and statutory interest at 8% per annum.

Both rhe policy the OP is discussing, and PPI, were a means to pay a loan or other comitment in the event you were unable to pay, e.g by being made redundant, health issues etc. I don't see much difference, please explain the difference.

I am not saying the policy the OP i suggesting is "wrong" any more than I am suggesting PPI was "wrong"

The PPI "scandal" appears to be people being forced to have it against their wish, i.e. as a condition of having a particular loan. That does not mean it was wrong for all people, just some.

The PPI compensation scheme appears to compensate anyone who had PPI regardless. As I say, I declined it. But my (now) wife had a loan to buy a motorbike. She chose to take PPI so she would be covered if she lost her job (she didn't so never claimed) In spite of her actually thinking it was a worthwhile decision, she received a compensation payment of nearly 4 times what she actually paid in PPI

It just sounds to me like the banks are trying to launch a "cleaned up" replacement to PPI. I am not saying that is wrong, as long as it is a choice to take it or not.

Mark_Jefferson

I just did a quick search on moneysavingsupermarket, and got a quote of £13.10 per month for a policy with the same amount of cover.

This suggests that you would be vastly overpaying if you were to buy the policy being offered at £31.66 per month.

Read the Ts&Cs carefully when looking on price comparison websites (PCWs) for this kind of cover. PCWs often only offer shorter-term cover (that will pay out for one or two years per claim). Often such policies will also not use the 'own occupation' definition of incapacity. This is the best definition as it means it will pay out if you can't do your own specific job. Cheaper policies tend to use the 'suited' definition of incapacity, which means that in the event of a claim the insurer is entitled to ask your partner to do a job the insurer feels he's suited to based on his skillset if he can't do his own job.

It's unlikely my partner will need this product. He is 31 years old and has never been ill in his life, other than a fungal toenail

Then this is the perfect time to get cover if you are considering it. It's better to get cover when you're young and healthy as there'll be no exclusions and premiums are cheaper if you guarantee them when you're young. Once you get older premiums get more expensive due to age, and you might pick up exclusions if he does suffer any condition.

For instance, consider a bad back. Some of the most common claims on these policies are bad backs and it's really easy to put your back out (I know from experience...!). However, once you've suffered a condition like a bad back you'll probably get a spinal exclusion on the policy preventing you from making a back claim in the future. Taking out a policy while you're young and healthy means you're covered in the most comprehensive manner possible.

kingstreet

ProDave wrote: »

Both rhe policy the OP is discussing, and PPI, were a means to pay a loan or other comitment in the event you were unable to pay, e.g by being made redundant, health issues etc. I don't see much difference, please explain the difference.

I am not saying the policy the OP i suggesting is "wrong" any more than I am suggesting PPI was "wrong"

The PPI "scandal" appears to be people being forced to have it against their wish, i.e. as a condition of having a particular loan. That does not mean it was wrong for all people, just some.

The PPI compensation scheme appears to compensate anyone who had PPI regardless. As I say, I declined it. But my (now) wife had a loan to buy a motorbike. She chose to take PPI so she would be covered if she lost her job (she didn't so never claimed) In spite of her actually thinking it was a worthwhile decision, she received a compensation payment of nearly 4 times what she actually paid in PPI

It just sounds to me like the banks are trying to launch a "cleaned up" replacement to PPI. I am not saying that is wrong, as long as it is a choice to take it or not.

Permanent Health Insurance has no connection with any lending product. It is designed to replace income lost due to illness or disability. It has featured due to the OP taking a mortgage, but the cover is not related to a mortgage payment or lender.

Unemployment or redundancy is not a feature.

PPI was sold without advice and often a single premium was added to borrowing, with no monthly premium option being offered.

PHI has nothing to do with 'the banks' it's a product which has been offered by traditional life assurers for decades but which has been tainted by association. It is a product still largely sold via the advice process where cover is tailored to the applicant's personal circumstances, such as occupation, deferred period, term etc.

It really is a valuable product badly undersold and misunderstood.

Help1234

Thanks for everyone’s thoughts on this matter.

I am wondering though if I take this out in say 20 years time if my partner needs to claim, the cost of living will have likely massively increased. Furthermore, we may also have a more expensive house and mortgage/lifestyle. £500 a month may well not help us out if we need to claim in 10-20 years time. Does anyone know if the payments we would receive will have gone up by then in line with inflation?

Slinky

SuboJvR wrote: »

This is something different again though - life insurance policies usually have a "terminal illness" clause that will pay when a person is diagnosed with illness anticipated <12 months to live.

I'm fairly sure it wasn't a life insurance policy she had as I would have expected that to pay out, given that's what you're paying it for, I think it was some sort of income protection insurance.

Mark_Jefferson

You can opt to index-link the benefit so that it rises each year in line with inflation. What happens is if you choose this option, the insurer writes to you each year and says the retail prices index has increased by X%, so we're increasing your benefit by X% and your premium by X% to cover the higher benefit amount. It's not mandatory to take up the increase every year, but you get the option if you add this to your policy from the start.

Many IP insurers come with a guaranteed insurability option (GIO). This allows you to 'top up' your benefit following certain life events, such as marriage, having children, moving to a larger home/getting a bigger mortgage. So if your mortgage doubled to £1,000 a month, you could apply for an additional £500. This is typically possible without additional medical evidence.