Self Employed Protection

lperdios

Hi I need some advice. My husband is 55 self employed and the main breadwinner. For years I have been saying we need Critical cover in case he god forbids gets sick and we can't pay the mortgage. He says its just a waste of money and they rarely pay out anyway. Cut a long story short we have no way of protecting ourselves should this happen. I have looked at income protection but this only seems to cover for a short while. Can anyone advise which is the best insurance to take out? Many Thanks

DullGreyGuy

Income Protection traditionally comes in two flavours with different technical names....

AS/ASU (aka PPI) is the short term version and importantly isnt long term insurance so can be cancelled by the insurer whenever they like and premiums change/increase each year

PHI is the long term version, premiums are fixed (or increase by a specified index) and the insurer cannot cancel it other than for fraud or non-payment. 

Traditionally PHI payout until a specified date (eg 65th birthday/your planned retirement age) but there are now some cheaper policies with a shorter payout period.  If you wanted this type of insurance you used to have to go via a broker or IFA but some, particularly the shorter policies, do now go via online non-advised sellers.

Critical illness is a very different beast, it only pays out for specified conditions and so you may be too ill to work but because its not a specified condition it doesn't respond. However it pays out a large lump sum even if you are off work for a relatively short while (relative is important as most illnesses covered it wont be a matter of days or weeks) 

Personally PHI is more important than CI but both have their place. As to payout rates... that depends what you want to measure against... of those that submit claims most policies have a payout rate in the mid 90%s however there are clearly many people who have the insurance and are fortunate not to get ill and so never submit a claim. 

ACG

You can get income protection that will pay out if he is unable to work long term. 
Critical Illness is expensive, but it is expensive because it does pay out. There are times it does not pay out, but in general it pays out around 90-95% of the time - insurers have claim stats on their sites. 

When I used to work for a life office, we had a claim on critical illness for a broken arm. That did not pay out and that went down on the stats as an unpaid claim. It will never be 100%, some on technicalities - ie you may have cancer at stage 2 and it will only pay out at stage 3 or you might just have numpties changing their arm (no pun intended) with silly claims. 

But they do pay out, if it did not then it would be a lot cheaper.