Income protection: another PPI?

[mickey]

For someone without a sense of entitlement does the income protection policy make much sense? Anyone has considered/taken out one?

[Zero Liability]

PPI: protects repayments on a specific credit product. It's mostly the single premium products lumped onto a loan that were mis-sold and sometimes sold fraudulently. The regular premium products aren't nearly as bad or expensive. They are cluelessly lumped together and due to volumes banks just choose to pay up so it is assumed everything was mis-sold.

Income protection: provides an income if you fall sick, out of work and/or suffer an accident. Not tied to a particular product. Usually underwritten. They are priced according to how much cover you want and as with any form of insurance due regard should be given to the T&C's. Their value can be be considerable if you do need to claim on it, especially due to an injury.

I have an income protection policy with Aviva.

[mickey]

Can I ask what proportion of the monthly payout is your premium?

[Martin@AS Financial]

For someone without a sense of entitlement does the income protection policy make much sense? Anyone has considered/taken out one?

Mine is with Scot Prov.

Income Protection taken through the right insurer is invaluable for the self employed as they do not have access to PAYE benefits such as sick pay. Essentially, a business could fold very quickly in the event of long term sickness.

I completely agree, that there are some unbelievably bad policies out there though. As always the fine print needs to be examined. Any policy that is not own an "Own Occupation" basis should not be taken up. "Worker tasks" policies will very rarely pay out on the basis that you can still work albeit in another job when sick - exclusions include not being able to wash and bathe yourself. Realistically, you are going to need to be in a very bad way to win your claim.

If you take up a policy, ask for guaranteed rates - you don't want your premium increasing because of the insurers claims that they have had throughout the year.

Finally, to ensure that your benefit is not eroded by inflation, make sure that your policiy is linked to the retail price index.

[mickey]

Hey that's great tips thanks!

[Martin@AS Financial]

Hey that's great tips thanks!

No problems at all.

[Freaki Li Cuatre]

I have income protection - have had it for years.

It kicks in after 3 months and pays out the basic amount (can't remember how much) to cover all my basic needs- bills, mortgage etc. for 1 year.

I'm thinking about cancelling it because I have enough in the war chest for at least a year so cant help but feel I'm wasting my money.

I'm worried though that if I cancel it I'll promptly fall off my bike and break my neck or something...

[BlasterBates]

Income protection is usually based on salary, not dividends!!

I do believe the odd contractor has fallen into this trap.

You need to weigh up the cost of insurance covering you for loss of work with building up a warchest.

Your own warchest is by the far the better tool, if you have enough. Cover for disability makes more sense for most contractors.

It's unlikely you couldn't get some sort of low paid permie work in the event of a bad contractor market.

[Antman]

I had a look and the ones I saw didn't make me feel comfortable with all the exclusions.

I prefer the build up a warchest route.

Having said that I do have life assurance until I'm 65.

[jmo21]

Income protection is usually based on salary, not dividends!!

I do believe the odd contractor has fallen into this trap.

You need to weigh up the cost of insurance covering you for loss of work with building up a warchest.

Your own warchest is by the far the better tool, if you have enough. Cover for disability makes more sense for most contractors.

It's unlikely you couldn't get some sort of low paid permie work in the event of a bad contractor market.

I think the last time this was discussed someone said there were providers who would take into account dividend income.