Income protection

madlyn

I have a policy that pays a portion of my income, should I become ill and unable to work.
It's with the cirencester friendly and it's income assured plus, it was taken out 17 years ago when I bought my home and I've never really looked at it since.
I've recently had a birthday and they've sent me a letter telling me that I've moved into a new age bracket and my monthly payment will be increasing.
I've also had a look at the policy and the weekly amount I'd get paid should I need to action the policy does not appear to have changed over the years.
I'd like to do some shopping around to see what else is available, I'm also thinking about stopping it all together once I've had a good read through the policy details, as my employer has a good sick pay scheme.
Could anyone suggest another company that offers this type of cover please?

MyRealNameToo

madlyn said:

I have a policy that pays a portion of my income, should I become ill and unable to work.
It's with the cirencester friendly and it's income assured plus, it was taken out 17 years ago when I bought my home and I've never really looked at it since.
I've recently had a birthday and they've sent me a letter telling me that I've moved into a new age bracket and my monthly payment will be increasing.
I've also had a look at the policy and the weekly amount I'd get paid should I need to action the policy does not appear to have changed over the years.
I'd like to do some shopping around to see what else is available, I'm also thinking about stopping it all together once I've had a good read through the policy details, as my employer has a good sick pay scheme.
Could anyone suggest another company that offers this type of cover please?

Income protection is a marketing term, there are two products that are sold under the name, AS(U) (aka PPI) and PHI. A quick google suggests yours is the full fat PHI version which gives much better coverage but inevitably is more expensive. 

Often you get a choice with PHI on if you want to index the benefit or not, if you dont it pays out the same amount for life, if you do then both premiums and benefits go up by inflation each year 

The average claim on PHI is something like 6 years... you mention your employers sick pay, how long is that paid out for? Until you hit your mid 60s or 12 months? You can adjust the deferment period on a PHI policy to reduce the cost so if you get full pay for 6 months, and half pay for 6 months but savings could see you through then by having a 12 month deferment period would notably reduce your premiums. 

Some employers offer a Group IP product but note that these are materially different, they often are paid via PAYE so the benefit is taxed and for long term conditions they often are keen on settling on a lump sum basis whereas PHI will payout for years.

Your better off speaking to a whole of market protection broker who can review your current policy, get quotes for a replacement policy and you can decide if its better to stay, switch or cancel. 

dunstonh

It's with the cirencester friendly and it's income assured plus

Friendly societies tend to operate hybrid income protection plans that differ from those offered by insurance companies.   They can be quirky in some areas, but also offer things that the insurance companies won't.

I've also had a look at the policy and the weekly amount I'd get paid should I need to action the policy does not appear to have changed over the years.

Its an option selected at that outset. i.e. level, fixed indexation or inflation linked.

I'd like to do some shopping around to see what else is available, I'm also thinking about stopping it all together once I've had a good read through the policy details, as my employer has a good sick pay scheme.

Its rare for an employer to offer terms anywhere near a PHI policy.  Will your employer really pay you until retirement if you are off sick?

madlyn

@MyRealNameToo Thank you for your detailed reply, it's very helpful, sick pay from my employer is for 6 months and full pay, the deferred period on the policy is 4 weeks, so I could actually extend that as well as asking how changing to an idex benefit would affect the premium.

@dunstonh Thanks for your response too, I definitely have some things to look into. 

MyRealNameToo

madlyn said:

MyRealNameToo Thank you for your detailed reply, it's very helpful, sick pay from my employer is for 6 months and full pay, the deferred period on the policy is 4 weeks, so I could actually extend that as well as asking how changing to an idex benefit would affect the premium.

dunstonh Thanks for your response too, I definitely have some things to look into. 

As said above, friendlies can be different, for normal insurers moving to indexation doesnt impact it at all today, next year if inflation is at 3.6% then your premiums go up 3.6% and your benefit goes up 3.6%

It's certainly worth considering increasing the deferment period but also consider what happens if you change job etc and your next employer has a less generous sick pay? Do you have other means to carry you to the 6 month mark irrespective and so can benefit from the lower cost safely? 

With a normal insurer you generally can't chop and change the policy and buying again new at an older age is much more expensive in the round than possibly have a shorter deferment and just sticking with it. 

Weighty1

The big issue you have now is that the policy with Cirencester Friendly is based on your age 17-years ago and any policy now is going to reflect the fact you are significantly older.  If you need a higher level of income then there's a good chance that the best option would be to keep the existing plan and arrange a new top up policy to run alongside it to cover the shortfall.

Cirencester plans have premiums which are both guaranteed not to change, reviewable periodically and those which increase every year (taking into account that as you age you are more likely to claim so it's fairer to charge aging clients more).

Has your premium increased since the plan was taken out?  If it has then the choice of switching to a new insurer will be easier since you're already paying for a plan based on your current age (just not based on your current health).

MyRealNameToo

Weighty1 said:

Has your premium increased since the plan was taken out?  If it has then the choice of switching to a new insurer will be easier since you're already paying for a plan based on your current age (just not based on your current health).

I would point out it's easier not easy. My experience is most regular insurers tend to quote guaranteed premiums and so a new provider would not be based on current age alone but up to the age the policy stops whereas Cirencester will be lower now for like for like cover given they know it will increase as the OP continues to age. The jump would be less though had they always been on guaranteed premiums given it would have then factored in those 17 years of younger age payments. 

Weighty1

MyRealNameToo said:

Weighty1 said:

Has your premium increased since the plan was taken out?  If it has then the choice of switching to a new insurer will be easier since you're already paying for a plan based on your current age (just not based on your current health).

I would point out it's easier not easy. My experience is most regular insurers tend to quote guaranteed premiums and so a new provider would not be based on current age alone but up to the age the policy stops whereas Cirencester will be lower now for like for like cover given they know it will increase as the OP continues to age. The jump would be less though had they always been on guaranteed premiums given it would have then factored in those 17 years of younger age payments. 

That's not quite accurate though.  I've just run a couple of quotes myself and based on what an age-costed premium with Cirencester would be NOW, had I taken it out 20-years ago, and comparing it to guaranteed premium from the 'larger' insurers the cost difference is no different than the typical spread you would get through a quoting portal anyway with somme insurers being cheaper than Cirencester and some being more expensive.

Also, I did say easier and not easy