Covering (most) life risks

varghesejim

I am looking for insurance.

I am a contractor(office based). So no employer payed insurance.

Question is what are all the products I need.

Life insurance is a must. So no questions here.

Income protection insurance sounds good. However, in most of the cases you need to prove previous income for it to pay out. As a contractor who takes less salary and more dividends it is going to be tricky.

Critical illness cover can pay lump sum, but it wont cover all illness.

Sounds like one would need all three insurance to have wider cover for risk scenarios.

However, I couldn't find a product which provides all three. They have life+critical illness and life+income protection combos.

But no life+critical illness+ income protection

Is there any reason for this?

Say it can be purchased individually, is there any restriction on claiming from two sources? For example if one get cancer , critical illness policy and income protection can pay out?

SonOf

Income protection insurance sounds good. However, in most of the cases you need to prove previous income for it to pay out. As a contractor who takes less salary and more dividends it is going to be tricky.

You need to look at the PHI version of income protection. Not the PPI version.

Sounds like one would need all three insurance to have wider cover for risk scenarios.

That is generally the case, yes.

However, I couldn't find a product which provides all three. They have life+critical illness and life+income protection combos.

They exist but its not always the best option. e.g. the best PHI policy for your needs may not offer the best CIC or life assurance option.

Is there any reason for this?

a) you are not looking at the whole of market. So, you are missing providers/options. e.g. using comparison sites will limit your choice.
b) its not often that a provider is best for all three segments.

csgohan4

get a broker who can find an insurer who accept your total gross income from your self assessment to include dividends as well

Critical illness is a luxury imo, if you have the money, great but if not no big deal, they also have exclusion, for example even if you have a heart attack or cancer it needs to be of a certain severity

sal_III

You can get an income protection as a contractor that includes dividends income. The problem is it isn't very cost effective. General Income protection is more for permies, that live paycheck to paycheck and being out of work for a month or two can ruin them financially. If you are "doing it right" as a contractor you should be prepared to lose your income with no notice and have 6m+ worth of living expenses as a reserve.

Fora long term income protection such as PHI usually comes at a premium and the maximum payout is rather short of what most contractors actual income is, so can't replace lifestyle.

Ultimately it's up to you to weight in the risk/benefit/cost and decide what type and amount of cover you need.

Personally I work in IT, there are very few scenarios where I could end up being alive but unable to work long term, that would warrant PHI type of insurance for me. For the short term I have my reserves and critical illness cover that would combined cover 12m+

The reason I prefer CI over IP is that most IP stop paying out as soon as you are fit to return to work. Which as I mentioned in my case would be within 6m and start paying out after 1-2m. For the same premium CI pays out much more in a lump sum than 12m of IP, yet alone 6m.

Weighty1

Contrary to the above, there would be no cost difference whether you were trying to cover salary or dividend payments. Most insurers will happily cover dividends on an income protection plan, some will even cover spouses salary, provided they are not a fee earner and don't already have their income protected elsewhere.

In regards to life insurance, as a you have dividend income, I'm guessing you work through your own limited company, in which case you could look at a Relevant Life Policy as a tax efficient way of arranging life insurance via the business.

As SonOf mentioned, trying to lump all 3 types of cover together is unlikely to come up with the best arrangement for you. You'd be better getting the best selection for each product. It might take a little longer to arrange but it's not like you need to arrange this every week, more like every decade!

Weighty1

sal_III wrote: »

Personally I work in IT, there are very few scenarios where I could end up being alive but unable to work long term, that would warrant PHI type of insurance for me. For the short term I have my reserves and critical illness cover that would combined cover 12m+

The reason I prefer CI over IP is that most IP stop paying out as soon as you are fit to return to work. Which as I mentioned in my case would be within 6m and start paying out after 1-2m. For the same premium CI pays out much more in a lump sum than 12m of IP, yet alone 6m.

What is you had a stroke? The 3rd most common critical illness in men......

sal_III

Weighty1 wrote: »

What is you had a stroke? The 3rd most common critical illness in men......

No history of these in the family and even then it will depend on the severity. Looking at stroke survivors in the extended family and friends, none of the lasting effects any of them have will prevent me from doing what I do now.

As I said, everyone needs to take the decision for themselves. There is no golden formula do X,Y,Z.

The only "mandatory" thing if you have dependants is the life insurance, which considering the premiums is a no-brainer