[Closed] Income protection

Insure yourself by getting 6 months money in the bank, it’s liberating and saves you in most eventualities rather than 1

I’ve been laid off since mid April and loving it instead of fretting

Insure yourself by getting 6 months money in the bank, it’s liberating and saves you in most eventualities rather than 1

+1

If you are self employed you should have something like this anyway and and if you are employed I would hope your employer would give you some kind of sick pay

I took one out with our first mortgage approx £20 per month for £400 per month (I know!). 25 years are just about up, so that’s £6000 in premiums and we’ve drawn approx £1200 from it in that time. For perspective I’ve been made redundant 3 times. If we had bought scratch cards instead we probably would have got £2000. YMMV.

If you are self employed you should have something like this

Everybody should have 6 months money in the bank

sanctimonious much

sanctimonious much

+1 pretty difficult to achieve for your average family on an average wage..

A quick reality check....

A third (33%) of people in the UK – or 8.5 million1 households – have £250 or less set aside as a financial safety net, new research from HSBC shows.
The survey of over 2,000 people found that almost a quarter (24%) of all UK households have no savings at all, while 9% have savings of £250 or less. Based on UK households’ average outgoings2, this would last just four days if they were to unexpectedly lose their income.
18-24 year olds are the group most at risk: 33% have no savings at all, while a further 10% have savings of under £250. Based on their average outgoings, this age group would survive just three days on £250. Worryingly, despite being likely to have more financial responsibilities, almost a third (31%) of 35-44 year olds also have no savings and 12% have less than £250.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwiZh5_j_ujqAhXZVRUIHXtGAzoQFjASegQICRAB&url=https%3A%2F%2Fwww.about.hsbc.co.uk%2F-%2Fmedia%2Fuk%2Fen%2Fnews-and-media%2Frbwm%2F150310-savings-cushion%3Fla%3Den-gb&usg=AOvVaw366ZOpAM6qConP0NjvXbnn

 

Everybody should have 6 months money in the bank

While I agree in principle and I’m nearly there, the vast majority probably have less than 6 days money in the bank, let alone 6 months.

I’ve got 6 months of available balance on my credit cards, does that count?

Well, MrsMC and I were both taught at school (mid 80s) that you should have 3 months take home pay put to one side, and we've managed it somehow despite mortgages and kids.

Naff all in the way of holidays, nice cars etc, but it's possible

It's going to cost ya!
I looked into it about 20 years ago and the premiums were something like 25% of the monthly benefits. Add to which, being self employed they weren't going to pay out until my business folded or I went bankrupt, by which time I'd have been past caring.
As above, stick some money away for a rainy day if you can, or develop a good line in credit.
Or stop hurting yourself...

the vast majority probably have less than 6 days money in the bank, let alone 6 months.

This is why we need to live within our means. We’re in the middle of a climate emergency and instead of looking to the future we’re spaffing it up against the wall with new phones, cars, holidays, mountain bikes etc. I raise see your sanctimonious and raise you to sensible...

Putting aside money every month (go for more than the insurance cost) and at some point you either have a) some bunce and/or b) a rainy day emergency fund.

136stu gives you reason for not doing insurance but savings.

I took this insurance BiTD, saw chuff all for it (fortunately!). It has been notoriously difficult to claim as well... (mis-selling iirc).

+1 pretty difficult to achieve for your average family on an average wage..

Far from impossible though: https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/articles/morethanonefifthofusualhouseholdspendinghasbeenlargelypreventedduringlockdown/2020-06-11

I have a policy through the Exeter

I was surprised how low the monthly figure was, seemed comparable to a frivolous streaming subscription. Can’t remember all the details but essentially pays a monthly income until pension age as long as I can’t work (due to health/injury). Any benefits/employer scheme is deducted first and I don’t think it kicks in for 6 months. Perhaps not the sort of thing the OP is after but I thought could be of interest to some on the thread.

I’m still fairly young with 2 small kids, it occurred to me things would be pretty bleak if I had a long term illness or injury which meant I couldn’t work and my partner had to juggle job/caring/childcare. I do have pretty good cover through work but this lasts a finite number of years, what do you do after that!

Having just reached the age of maturity (late 40's) I've done **** all about banking but I am in an apparently luxury position of having a couple of months worth tucked away.
No new frame for me and cheap phones!
Advice taken and thanks

Possibly too late, but I will chip in anyway.

I have income protection and have done for the last 20+ years. I started it shortly after getting a job following redundancy. The fear of not being able to pay a new'ish mortgage drove me into it, when I was living with my parents I never felt the need.

Although I have been made redundant again since then I have luckily always got a job before needing it.

CV19 also has me checking the policy details!

Things I learnt;
-It's not cheap, so don't plan to cover your whole income, just enough to stop you drowning financially.
-It may negate some/all social security benefits (yet another case of those that look after them selves can feel like a mug).
-Many policies will only ever pay once and for a maximum time period. In my case it will pay once and for a maximum of two years.
-When claiming on the policy you still need to pay some of the premium. Weird, but easy to plan round by adding a bit more to the amount you can claim per month.
-As above, I don't think it works well (possibly at all) if you are self employed.

For a lot of my life I have also had some savings, but until recently not the recommended 3 months. The policy has taken some of that pressure off when we were cash strapped and spent the rainy day budget.

It may negate some/all social security benefits (yet another case of those that look after themselves can feel like a mug).

Not sure that makes sense. Surely that means you have two options (or a combination of options) where many more seriously sick/unemployable/unemployed don’t have that choice/have had to sell their homes (or could never have one) and become defacto elected full-time or part-time carers. They rely on payout from National Insurance Scheme.

Yet somehow you feel that you are in a worse position/like a mug? Can’t you at least feel proud that you never got really sick or desperately unfortunate? Or proud that you always had the option/excess wealth/family security and foresight to take out private insurance? Your fallback is also social security. People in a worse situation have only social security*. As a fallback to that there are miracles, pity-rallies and homeless shelters.

*Itself unreliable depending upon changeable government policies/‘social-cleansing‘ trends

^ Sorry if I came over a bit ranty. In the last decade have had two (hardworking and outgoing) people in our lives (1 x brother, 1 x former employer) take their own lives because of injury/health/unemployment - the growing social stigma along with withdrawal/unavailability of support were aggravating factors in both cases.

OP I have messaged you, get in touch if you want a bit more info.

I looked into it about 20 years ago and the premiums were something like 25% of the monthly benefits.

My premiums are £16.90/month for £1000/month cover. (47 years old with ceramic hip and mangled ankles)

Add to which, being self employed they weren’t going to pay out until my business folded or I went bankrupt, by which time I’d have been past caring.

Every current policy that I have seen pays the benefit if you are signed off work by a GP (for ANY illness or injury) No idea about cover that was available 20 years ago, but nothing like that exists now.

Many policies will only ever pay once and for a maximum time period. In my case it will pay once and for a maximum of two years.

It is more likely that your policy is Limited to a maximum 2 year claim PER CONDITION. Once you have claimed for 24 months for a particular condition, that then becomes and exclusion on the policy, but the cover continues for any other claims.
Full cover policies are available that would pay every month until the policy end date, obviously this costs more, but possibly more affordable than not earning anything for a few years ?

When claiming on the policy you still need to pay some of the premium. Weird, but easy to plan round by adding a bit more to the amount you can claim per month.

Most policies would have "Waiver of Premium" built in as standard. this means you don't pay any premiums if you off work ill/injured. And applies from the date you are off sick regardless of the deferred payment period set on the policy.

-As above, I don’t think it works well (possibly at all) if you are self employed.

It would work exactly the same for Self Employed as it does for Employed, as it is reliant on a GP to sign you off work rather than anything from an employer to make a claim, there is no difference between employed or self employed in the event of a claim.

Currently - savings. The benfit is, if I don't need them, I can spend them on something else.

If I ever eventually can afford to buy a house, that will wipe them out. I'll be reliant on a loan should the worst happen at the worst time.

Plus strict instructions to turn me off if I'm a vegetable.

I'm lucky that some options in my chosen career path can be done from home, or from a wheelchair, etc. A slef employed plumber may have a different outlook to me.

I’m lucky that some options in my chosen career path can be done from home, or from a wheelchair

This would make accessing relevant cover fairly cheap then.
The underwriting on Income Protection takes occupation into account, but more from a "what sort of illness/injury would sign you off work for a long time"

for example, a Surgeon is a safe job, risk of Injury at work would be low, so you would expect favourable premiums. But a broken finger could keep them off work for months. a builder might be off for a few days with the same injury.
So it is not based as much on the actual risk the job presents, but more on the ability to do that job while injured or ill.

@neilglover I know this is your trade so I may well bough to your better judgement, but (from memory) I think I have basic income protection. It pays if my income is reduced for any reason including redundancy and then taking a lower paid job. As such it is not critical illness cover and (again from memory) that is the reason I can only claim once.

@Malvern Rider - Clearly I have touched a nerve - sorry. However, please note the important word "can" in that sentence. Despite a severe accident and a major illness I have been lucky in that I have never had to claim on my policy. I pay because I can and I like the level of security afforded. I do indeed feel fortunate. {EDIT} but I have also been made redundant a lot with practically no pay outs (£200 in total), so I am still very cautious.

@neilglover I know this is your trade so I may well bough to your better judgement, but (from memory) I think I have basic income protection. It pays if my income is reduced for any reason including redundancy and then taking a lower paid job. As such it is not critical illness cover and (again from memory) that is the reason I can only claim once.

If it covers unemployment also, then you may well be correct. (I assumed incorrectly it was Income Protection)

Accident Sickness and Unemployment cover (ASU) isn’t something we deal with as a company, as it is very difficult policy to claim on (a LOT of small print and conditions on claims) and very limited in the real life protection it offers.

I looked into this years ago - the premiums are large and claiming is difficult so I never bothered

I looked into this years ago – the premiums are large and claiming is difficult so I never bothered

As I said above, I pay £16/month for £1000/month of cover.

Very easy to claim as it covers ANY illness or injury that keeps me from working.

If I am signed off work longer than 8 weeks (the time I get full salary sick pay from my employer) then I can claim. Very simple.

Possible that “years ago” when you looked, things were different. But that’s how it is now.

@NealGlover
What is the technical name for the policy you're talking about? Is it "Income Protection Insurance"? I looked into these types of insurances a few years ago, and was totally bamboozled by the types available, and often the lack of clarity over what they were designed for. I gave up in the end.

Also, does it just cover for a specific length of time? For example, lets say I'm in an accident that renders me unfit to do my job for life, would it cover that, or is it time limited?

My experience of insurance has not been good. You buy it for peace of mind, happily pay the premiums then find out the exclusions and it isn't really worth having.

Now I only take insurance when legally compelled to. Just my view, insurance companies are not charities.

nealglover seems a lot more clued up than me but I have an "Income Protection Policy" I purchased using MoneySupermarket as a broker that covers me until 65. So if I had an accident or illness that rendered me unable to work it would pay me a salary until 65, bikes/racing was included in this. I'm early 30s but my view was get locked in with a low premium, if you start picking up pre-existing health conditions you'll either have higher premiums or policy exceptions.

I looked into these types of insurances a few years ago, and was totally bamboozled by the types available

I was at that stage when I was looking at revising our policies after increasing our mortgage, so gave up and thought we'd just rely on what we had as we'd not had to claim in 15 years. A year later Mrs FB was diagnosed with cancer. The existing policies paid out, but we'd be in a different financial position if I'd persevered.

After the dust had settled, it was time to look at new policies- especially now I'm the sole wage earner. Around that time there was a thread like this and I made contact with Neal. He took the time to explain the various options and there was no pressure to take the policies, unlike when I'd called places previously.

@UrbanHiker, yes it is Income protection. If you need any help getting information let me know. This is what I do for a job and happy to help. email nealglover@lifesearch.co.uk and I will get back to you and see whats the best option for you depending on what you need.
And answer any questions about the cover options you might have.

My experience of insurance has not been good. You buy it for peace of mind, happily pay the premiums then find out the exclusions and it isn’t really worth having.

Now I only take insurance when legally compelled to. Just my view, insurance companies are not charities.

In a way I would agree with the sentiment, but as an advisor my job is to match the policy with the need, and be clear about the limitations of the cover and any exclusions.

Although generally with the cover I deal with, there are very few, and where there are exclusions they would be clear and obvious and also clearly explained before the client agreed to any cover.

[devils advocate] Insurance companies are not charities, but they certainly feel like they are when they are paying your mortgage and bills, and feeding your family for a few years while you are recovering from an Illness/Injury . [/devils advocate]

"My experience of insurance has not been good. You buy it for peace of mind, happily pay the premiums then find out the exclusions and it isn’t really worth having.

Now I only take insurance when legally compelled to. Just my view, insurance companies are not charities."

+1 !

You buy it for peace of mind, happily pay the premiums then find out the exclusions and it isn’t really worth having

To be a tad facetious, surely you carefully read the policy documents and understand what is and isn't covered before committing to take the policy?

To be more understanding, yes this does concern me that I've misunderstood/misinterpreted the policy and the provider decides that whatever has happened is out with what is covered.

@Mat if you have a digital copy of your documentation I can have a read over it if you like and let you know what is covered (and any limitations you might have missed ?)

Email above.

You buy it for peace of mind, happily pay the premiums then find out the exclusions and it isn’t really worth having

To be a tad facetious, surely you carefully read the policy documents and understand what is and isn’t covered before committing to take the policy?

To be more understanding, yes this does concern me that I’ve misunderstood/misinterpreted the policy and the provider decides that whatever has happened is out with what is covered.

My House contents insures me against theft of my bike if it is "immobilised".

Is my bike insured?

If it is stolen it would be easy for them to argue that it was not immobilised otherwise it could not have been 'mobilised' to take it from my house.

In my experience, this is how insurance companies reduce their payouts. They point out the exclusions early in the claim process and expect a large percentage of people to roll over and give up. You can read the policy all you want, but this kind of wording is everywhere in a policy and they can be intransigent when you talk to them (David and Goliath, but David rarely wins in real life).

In my experience, this is how insurance companies reduce their payouts. They point out the exclusions early in the claim process and expect a large percentage of people to roll over and give up.

Life insurance (for example) only has one exclusion.
Suicide within the first 12 months of the policy.
No wriggle room at all.

Critical illness cover has a maximum of three standard exclusions (often less depending on the insurer)
Purposefully Self inflicted injuries.
Refusal to follow medical advice.
Injuries sustained while performing a criminal act.
All reasonable and clearly stated at purchase.

Income protection cover has the same as Critical Illness cover. But will come with additional client exclusions based on the health questionnaire in the application.
These would again have to agreed individually by the client before taking out the cover.

General Insurance may well be different. But the Life and Protection part of the Industry dislike not paying claims. It’s terrible PR.

UK insurers pay 99.6% of life insurance claims (most of the other 0.4% are declined due to deliberate non disclosure of medical conditions)

To be a tad facetious, surely you carefully read the policy documents and understand what is and isn’t covered before committing to take the policy?

Good luck with that one...

That reminds me of a chap who featured on a consumer rights slot on R4 a while ago, had been paying out £60 a month for 16 years on a policy which included critical illness. Cancer, heart attack, stroke etc.
Sure enough, one day he experiences severe chest pain, collapses and gets blue lighted off to CCU where he gets fixed up. It was very nearly curtains for him.
A couple of months off work are required to recover so it's time to cash in that heart attack cover...
Except he had a cardiac arrest, not a heart attack, so was entitled to nothing.

The heart attack cover was only for plumbing, not wiring.
I think it's a fair assumption that most of the general public would assume that heart trouble which almost kills you and puts you off work for months is a 'heart attack' and wouldn't know the difference between that and cardiac arrest.

I could really do with some cover, but each time I've looked in the past few years I've always come to the conclusion that just having at least six months wage in the bank at all times makes more sense. It's so expensive to get cover for everything.

It might be time to revisit though.

Good luck with that one…

That reminds me of a chap who featured on a consumer rights slot on R4 a while ago, had been paying out £60 a month for 16 years on a policy which included critical illness. Cancer, heart attack, stroke etc.
Sure enough, one day he experiences severe chest pain, collapses and gets blue lighted off to CCU where he gets fixed up. It was very nearly curtains for him.
A couple of months off work are required to recover so it’s time to cash in that heart attack cover…
Except he had a cardiac arrest, not a heart attack, so was entitled to nothing.

There is something wrong with the story and must be a lot of detail missing.

A typical Heart attack and Cardiac arrest definition on a Critical Illness policy:
(this is the condition that must be met for the claim to be paid.)

Cardiac Arrest:
Sudden loss of heart function with interruption of blood circulation around the body resulting in unconsciousness and either of the following devices being surgically implanted: • implantable cardioverter-defibrillator (ICD); or •cardiac resynchronisation therapy with defibrillator (CRT-D)

Heart Attack:
Death of heart muscle, due to inadequate blood supply, that has resulted in a definite diagnosis of a new myocardial infarction by a UK Cardiologist

Some years ago my employer was in massive trouble and winding down. Massive redundancies in coming over a 2 / 3 year time horizon.

We all looked at these policies and the resounding view was they are a total waste of time. Any pay out is capped for an initial period so you have to pay in fairly long term before you are eligible to get a decent amount out. By the time you have been paying in for 2 or 3 years you have to have a massive life changing event to ever break even. The redundancy cover wont get your money back in 90% of cases. The health issues will but the amount back v's odds of that happen v's cost of the policy made this a total waste of time. Putting the cost of it into a savings account seems far more rationale.

I have income protection deferred for 3months with my mortgage, I have Life and critical illness cover.

I also have a sports accident policy via Helen Gaskell helen@bespokenewcastle.co.uk

She is a MTB'r and will advise on a suitable policy.

No one covers separated shoulders/collarbone, break it or dislocation only.

@uwe-r I would agree with that as you are talking about "Accident Sickness and Unemployment" cover (ASU)
I would not recommend that cover to anyone really, as it is prohibitively expensive and not likely to cover what is needed in the case of Unemployment (for most people)

This is very different from "Income Protection" cover though, which focusses on health and covers the policy holder for ANY Illness or Injury that prevents them from working (no definitions or lists of illnesses covered) and pays out a monthly income until they return to work.

It is no surprise that redundancy cover has changed over the years as the job market changed, and no it is just not a viable product in my opinion, for the Insurer or the Client.

@nealglover Noted I assumed they were one and the same.

No one covers separated shoulders/collarbone, break it or dislocation only.

This may not be specifically covered on your Accident policy (although it would be covered on AVIVA fracture cover for £5000)
EDIT: new AVIVA fracture cover policies may now do now exclude MTB - I just checked will check.

But it would be covered on your Income Protection policy, if it stopped you from working beyond the deferred period you selected.