Income protection and critical illness insurance/s

Aretnap

caldi9 said:

Isn't PMI and PHI the same?

No.

PMI = Private Medical Insurance - pays for the cost of medical treatment in a private hospital.

PHI = Permanent Health Insurance - a long term income protection policy which pays a monthly income if you're unable to work for health reasons, usually until you reach retirement age, or some other age that you fix at the start of the policy.

PHI is what you're looking for. You won't usually find it on price comparison sites - it's normally sold through intermediaries like IFAs or mortgage brokers as it's quite a complicated product. There are quite a few options to consider. eg Do you want a policy that pays out if you're unable to do your current job, or one that only pays if you are unable to do any job whatsoever? Do you want it to start paying the moment you get ill, or are you happy to wait a few months before it starts paying out? And so on.

csgohan4

if you can afford it  Life assurance, income protection, CIC in that order or all 3 . I don't have CIC so I can maximize my income protection but it is deferred to 12m so it is more affordable

lisyloo

caldi9 said:

lisyloo said:

caldi9 said:

dunstonh said:

- What are the most important factors to watch out for? We know how insurances try not to pay.

Life assurance pays out in over 99% of claims.  CIC pays out in over 95% of claims.   PHI is a bit lower but that is largely because people claim for things not covered. Often because they went with a budget version of PHI rather than comprehensive one.

- Is it better to get a combined insurance that covers both income protection and critical illness (and potentially life insurance on top) or rather separate insurances?

In most cases no.    To have a provider that is best in all three is unusual.    You end up having to compromise.  However, it can largely depend on what type of cover you are after.   Linking CIC and life assurance does often make sense though.

- Is it better to get an insurance as married couple or individually?

You cover the financial need.  For some people that will mean joint cover is needed.  For others it will mean single life or a combination.

Thanks, in case of having an income protection insurance only and a critical illness former seems obsolete, hence the idea of having both CI and income protection insurances or having a life insurance and an income protection insurance.

Having both gives you optimium cover but it will be expensive.  If you need to restrict due to budget then focus more on the PHI side rather than the CIC side.

Having compared income protection insurances only, I am surprised about how short the benefit periods are (1-2 years). 

That is the PPI and not PHI.  PHI goes to your selected end age (typically retirement).

PHI (permanent health insurance) was the only type of income protection.  It is the best type but you can classify the plans available into budget, standard and comprehensive levels of cover.  That is not an official grading but just a way to help you realise that all plans are not the same and there is a wide range available.   Some marketers decided that permanent health insurance was not a consumer friendly name and started referring to it solely as income protection.    

Over the last decade, with PPI becoming a dirty name, some providers rebranded their PPI as income protection as well.    
PPI is not underwritten at point of sale either.  It is at point of claim (unlike PHI which is point of sale).   

Basically, you have PPI at the bottom of the pile and then PHI at the top but graded across the different versions.   

. What if an illness is severe and prevents you from doing the job that you have done previously? 1-2 years of cover are way too short in that instance.

That is what proper income protection (PHI) covers you for.  Not PPI.

Thanks.

Just to make sure: I have PHI, but was looking to add income protection / critical illness / life insurance. While I understand PHI may cover the health related costs, the income falls away in case of a severe illness. Aren't there longer lasting income protection insurances?

I wonder what the approach tends to be, combining CIC and PHI or life and PHI? Does it make a big difference cost-wise?

Confused. Do you mean PMI? (For medical).
otherwise what do you mean by PHI vs income protection (aren’t they the same).

firstly I think you need to start with your financial need.
an important question is do you have kids - because that implies a need for childcare and one parent cannot work and do childcare.

wrt life insurance - what do you want it for?
if you have no kids and one of you dies can’t the other sell up and move on or get a lodger? Or is this for one person to stay in the home mortgage free?

personally I think you need to take step back and work out what you want/need and also what you have.
do either of you have ANY pension funds at all?
whats your sick pay?
whats your savings?

once you have all the info you can see where the gap is in cover.

you do realise CI only covers certain illnesses? Whereas pHI covers the risk of not being able to work?
so if you get an illness that isn’t “critical” e.g. “bad back” then you won’t be able to make a CI claim.
CI can provide for treatment, bucket list, house alterations, but isn’t really suitable for income,.

i think you need to take a step back and work out need.
then compare with what you have - benefits, pension, savings etc. And work out the gap.

Btw - pension funds may be available if you die or have less than 12 months to live.

Thanks.

Isn't PMI and PHI the same?

We have private health insurances and are looking for a longer-term income protection insurance at reasonable costs, in case I cannot work due to an illness/accident etc. If those do not exist beyond 1-2 years, question is if they are actually of any use.

I do not want to eat up savings and investments, in case an illness etc. would prevent me from doing my current profession.

If it makes sense, I will add a life or critical illness insurance.

No. PMI (private medicate insurance) is for for healthcare, PHI (permanent health insurance) is for income.

so I presume you have healthcare for operations and consultations? That’s great.

what do both of your employers provide in terms of sick pay or PHI?
yes PHI exists up until retirement but I would not describe that cover as “reasonable”, everything you want will cost (and no offence but you want the kitchen sink).
Nothing wrong with that but you need to recognise it will cost to the detriment of your other savings investments and pensions.
so can you start by telling us what you both have for sickpay and PHI (check your employers handbooks or ask).
it important to understand what you have already before buying something.
for example if you have 6 months sick pay then you only need a policy that kicks in after 6 months.
it seems you want a policy that provides for your occupation? That will understandably be more expensive than one which only covers you if you can’t do ANY job.

you don’t need to run down your entire savings but if you can make the deferred period larger it will reduce your premiums. For example a policy that kicks in after 6 months will be cheaper than one that kicks in after 3 months.

why do you need CI if you have most (I think there is a 75% limit) of your income covered until retirement? 

PHI and life insurance (if required) are good products.
CI is a bit of an expensive luxury IMO if you have 75% of your income already covered.
you may of course disagree but be aware that 3 insurances for a couple will cost and I’d hazard a guess you might change your mind when you get quotes.
most people compromise on this stuff.

i understand why you want PHI now (for income).
it not clear why you want life insurance or CI (in addition to PHI).

caldi9

Thanks, first quick comparisons show high premia and fairly low benefit amounts for the PHI. Seems there is a gap for employees in the industry, if an illness does not qualify as critical, while the PHI does not pay much and is costly.

dunstonh

hanks, first quick comparisons show high premia and fairly low benefit amounts for the PHI.

PHI pays out the sum insured requested.       The premiums are based on a range of factors but occupation type is a key one.   Certain occupations carry a lot of risk whilst others do not.

You would expect a PHI policy to be more expensive than say a life assurance policy because you are more likely to claim on a PHI policy.  Maybe you can give us an indication of the sort of premium you are seeing and the sum insured and other terms to help us understand if what you are seeing is right or wrong.  (i.e. is if your expectation was wrong.  e.g. expecting a £6.50pm premium or are you setting quote terms that are going to shove the premium up)

caldi9

dunstonh said:

hanks, first quick comparisons show high premia and fairly low benefit amounts for the PHI.

PHI pays out the sum insured requested.       The premiums are based on a range of factors but occupation type is a key one.   Certain occupations carry a lot of risk whilst others do not.

You would expect a PHI policy to be more expensive than say a life assurance policy because you are more likely to claim on a PHI policy.  Maybe you can give us an indication of the sort of premium you are seeing and the sum insured and other terms to help us understand if what you are seeing is right or wrong.  (i.e. is if your expectation was wrong.  e.g. expecting a £6.50pm premium or are you setting quote terms that are going to shove the premium up)

 Costs around 55-60 per month for a 3k benefit (Holloway, Shepherds Friendly).  Just sounds off to me, hence looking for an insurance broker.

lisyloo

caldi9 said:

Thanks, first quick comparisons show high premia and fairly low benefit amounts for the PHI. Seems there is a gap for employees in the industry, if an illness does not qualify as critical, while the PHI does not pay much and is costly.

PHI pays up to 75% of income.
I believe the limit is there so as not to disincentivise people from returning to work as it’s easily defrauded e,g. No way to disprove a bad back.

there is no gap.
I’ve been telling you for ages what you want is expensive
no one is interested in a high liability (income until retirement) for a small payment. If you want good cover you need to be prepared to pay.

Have you looked at both your sick pay, existing benefits, savings and pensions yet?
this is trying to attempt a sensible balance between cover and costs yet you won’t reply.

if you contact an advisor expect them to want all the information, otherwise they can’t help you find the optimum and neither can we.

you need to narrow down your need and work out where you can compromise e.g. provide savings for a deferred period.

that is the only way to get the costs to something reasonable.

I am not anti insurance at all, but every penny you spend on insurance is money you can’t put in savings, investments or pensions so you need to do more work.

before you see an advisor you need to provide for both of you

sick pay
pension fund amounts (could reduce life ins)
details of pension payout on death - amounts of %
mortgage
how property is held (joint tenants or tenants in common)
debts
savings
investments
any PHI, life ins or Ci through work
details of your relationship e,g. Formalised marriage or living together (affects rights on death)

Sorry but if you aren’t prepared to do this expect to be underinsured (not covered properly) or over insured (paying too much).

if you don’t want to provide on here - fine see an advisor but you’ll still need it if you want an optimum result.

kaMelo

caldi9 said:

dunstonh said:

hanks, first quick comparisons show high premia and fairly low benefit amounts for the PHI.

PHI pays out the sum insured requested.       The premiums are based on a range of factors but occupation type is a key one.   Certain occupations carry a lot of risk whilst others do not.

You would expect a PHI policy to be more expensive than say a life assurance policy because you are more likely to claim on a PHI policy.  Maybe you can give us an indication of the sort of premium you are seeing and the sum insured and other terms to help us understand if what you are seeing is right or wrong.  (i.e. is if your expectation was wrong.  e.g. expecting a £6.50pm premium or are you setting quote terms that are going to shove the premium up)

 Costs around 55-60 per month for a 3k benefit (Holloway, Shepherds Friendly).  Just sounds off to me, hence looking for an insurance broker.

 What rate does the premium increase each year?
I don't know what you were expecting but £3,000 a month paid until age 65 for starting at £60/month I would say is a bargain.

Weighty1

caldi9 said:

dunstonh said:

hanks, first quick comparisons show high premia and fairly low benefit amounts for the PHI.

PHI pays out the sum insured requested.       The premiums are based on a range of factors but occupation type is a key one.   Certain occupations carry a lot of risk whilst others do not.

You would expect a PHI policy to be more expensive than say a life assurance policy because you are more likely to claim on a PHI policy.  Maybe you can give us an indication of the sort of premium you are seeing and the sum insured and other terms to help us understand if what you are seeing is right or wrong.  (i.e. is if your expectation was wrong.  e.g. expecting a £6.50pm premium or are you setting quote terms that are going to shove the premium up)

 Costs around 55-60 per month for a 3k benefit (Holloway, Shepherds Friendly).  Just sounds off to me, hence looking for an insurance broker.

Most of the plans from those 2 insurers are "age banded" meaning the cost goes up with age (as well as inflation if you index link it).

As a broker who quoets for these sorts of plans on a very regular basis then £55-60/month does not sound unreasonably expensive and that's without even knowing your occupation, smoker status, the retirement age of the plan, the deferred period.  All of these factors coud easily make it more expensive.

Think about the cost in comparison to car insurance.  How much does an average car insurance claim pay out?  £3,000? £5,000?  £10,000? and how much does a car insurance plan costs?  £300/year?  £500/year?  £700/year>

Now, an average income protection plan claim last just in excess of 6-years (I think 6-years and 4weeks is an average claim across the market) so if you had an average claim a sum of £219,000 would be paid out!  Double the cost of the car insurance for an average claim which pays out probably 40X as much.  Looks like pretty good value for money to me!

lassfarfromhome

OP you have had some good advice on this thread, in particular people clarifying the crucial difference between PHI and PMI.

I thought it might help if I share my own experience.

I was a well-paid professional with PHI, going about my usual life when suddenly I developed an illness in my 40s.  This happened out of the blue, and I have not been able to work since the onset of my illness (over 5 years).  There is no treatment or cure.  Spontaneous remission happens occasionally, mostly early on.  For the last few years (after the PHI deferred period) the insurers have been paying me 75% of my salary.  As a result, I have maintained my lifestyle ie kept paying mortgage, bills etc.  This has meant that although I have huge stress about my future health and what my life will look like, I never have to worry about money.  The PHI will continue until I reach retirement age or I return to my own job (not just any job).  If I hadn't had the PHI I most likely would have had to sell my flat, and go and live with my parents.  My life now is very constrained but at least I am independent, financially and otherwise.  Please do consider taking out proper PHI to retirement age.  I sincerely wish you good health forever, but illness and accident that leave you unable to work (but are not critical illnesses for the purposes of critical illness policies) do happen and once they have, it's too late to protect your position.  Viewed from the after developing an illness that means I can't work, the PHI premiums seem like an absolute bargain.  Please consider it.