Permanent Health Insurance vs Alternatives

JohnBarleycorn_2

I've been looking into the various types of insurances around, and I figured that Permanent Health Insurance was much more useful to me than the usual payment protection plans. The main reason being that, as far as I can gather, payment protection usually pays for only around a year, while PHI will pay out for a good deal longer.

For interest, I got a quote for PHI that would pay out something like £28000 for 25 years. The monthly premium quoted was £25. Now what I don't understand is, I would have thought this would be considerably larger than the short-term (1 year) payment protection premiums, given that the payout length would be 25 times larger if you contracted a non-terminal illness and couldn't work, but I can't imagine that the short term plans are only £1 per month?

I suppose my question is, why is there not a larger disparity between the premiums on 1 year and 25-year (permanent) plans? Also what are the usual getout clauses with these PHI plans? I've been advised that this is an "own job" policy, i.e. if I can't make it to work, they won't force me to take a different job from home if I was still capable of doing that.

Thanks for any advice.
JB.

shaunrc

Hi JB

One of the reasons for this is that the longer cover ( PHI) has a deferred period before it pays out. These can be 4,8,13,26,52 or 104 weeks. So this makes it cheaper as it excludes shorter-term illnesses etc.

Overall though personally I still think this type of policy in terms of PHI is better value and in my experience more likely to pay out.

Be careful to put all medical conditions and doctors visits on your proposal form to help guard against claims of non-disclosure of medical details.

dunstonh

I agree with shaunrc. PHI is far superior to ASU/MPPI.

JohnBarleycorn_2

Thanks for the information folks. Do you have any tips on the usual traps and getout clauses when it comes to paying out (other than pre-existing conditions)?

Many thanks,
JB.

dunstonh

PHI is medically underwritten at point of sale. So as long as you answer the health and occupation questions correctly you shouldnt have a problem. ASU/MPPI isnt underwritten at point of sale and its only when you claim that you find out if something is or isnt covered (assuming you havent spent the month reading the small print).

PHI does come in budget, standard and comprehensive form. Some of the budget plans are no better than an ASU/MPPI and barely worth the paper they are written on.

lisyloo

I suppose my question is, why is there not a larger disparity between the premiums on 1 year and 25-year (permanent) plans?

I'm not an expert so I'm just guessing but I would have thought that there is a LOW probability of being unable to work forever, so whilst I agree that the cover is MUCH more useful (as you get the peace of mind until retirement) there is probably a pretty low chance of claiming for an extended period.

dunstonh

In response to the difference... It could also be that you were comparing a budget PHI against the ASU.

Another consideration is that ASU can often be priced as a single price for everyone. Whereas PHI is priced on your age, occupation, smoker status etc. For some people, particulary clerical roles, that can make PHI much cheaper than say those with manual jobs.

Brum_Man

Also, most PHI policies cover you for Accident and sickness where as PPI cover you for accident, sickness and unemployment but as you say only up to a year. The unemployment part of the PPI also tends to make it quite a lot more expensive for a shorter term of cover.

Personally I think PHI is much better as it looks to protect your income and lifesyle as oppose to just one outgoing.

dunstonh

If unemployment is a concern, you can always get a standalone unemployment plan and a PHI policy therefore getting the best of both worlds.

Another option is an ASU policy to cover the first 12 months and then a PHI with a 12 month deferment.