A relative has been advised to increase their income protection policy following a review. They currently have cover for around 30 k pa after 6 months off sick. An advisor has advised them to go for a 100k policy. It will cost just over 200€ per month. Policy owner is 52 years old. Health is ok but job very stressful. What are the questions to ask the advisor. ? Are these policies limited in the number of conditions they pay out on ?
Dos and don’ts of income protection policies
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Dr Strangelove
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This is like asking a Maserati salesman what kind of car you need!
Don’t forget illness benefit of about €13k a year as well. Relative should choose a level of cover that won’t result in a huge decrease in lifestyle.
The older you are the more medical questions there are. I took out a policy soon after turning forty and a nurse had to come to my house to check weight and blood pressure. I imagine it gets stricter with age.
Remember these policies get tax relief.
Brendan Burgess
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This is the key.
But if they are ill, there is going to be a reduction in travelling and socialising.
They may still have mortgage payments.
Most people who have this cover, are grossly overinsured and claims are rare.
Cue a reply: "A friend of mine took this out for €10 a month and got cancer and got paid €50,000 a year by the company".
Steven Barrett
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What are their finances like?
As you get older, the need for insurance should decrease as your personal wealth increases and you can self insure.
Your relative needs to look at how much they actually need rather than what is the maximum level of cover that they can get.
Steven
www.bluewaterfp.ie
As you get older, the need for insurance should decrease as your personal wealth increases and you can self insure.
Your relative needs to look at how much they actually need rather than what is the maximum level of cover that they can get.
Steven
www.bluewaterfp.ie
And an increase in medical costs and ancillary requirements.
No one can know how much they might need when it comes to illness; I would aim to get at least 50% if you are in a relationship and even up to 2/3 of your current income if you are alone, if you can afford it.
Also worth checking with some of the Unions / Staff Associations - there's often good deals to be had.
Dr Strangelove
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I took mine til 62 on the basis that kids would be raised, mortgage likely paid off, and retirement imminent in any case.
I found a big jump in quoted prices when looking to insure to 60, 62, and 64.
I found the complete opposite!
They are still about ten times more common than life insurance claims. On lots of money makeovers I’ve seen people hugely over insured on life but never for income protection.
Brendan Burgess
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Yes, people are probably ten times more often sick than they die.
Steven Barrett
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Long term illness can take so many different forms. And most people have mortgage protection to pay off their mortgage on death. What do you do if you are too ill to work and the bills keep on coming in?
As with most insurance, you won't actually use it (insurance most used would be for stuff you could probably self insure such as phones) but it is the consequences if it is needed.
Is the list of conditions covered similiar between the insurance companies ? How many conditions are itemised ?
In reality is it difficult to make a successful claim if you get cancer or a stroke for instance ? Also If you get one of the listed illnesses at say age 59 I assume the cover will only last until age 60 or whatever age specified? So you would only get 6 months cover due to deferral period ?
In reality is it difficult to make a successful claim if you get cancer or a stroke for instance ? Also If you get one of the listed illnesses at say age 59 I assume the cover will only last until age 60 or whatever age specified? So you would only get 6 months cover due to deferral period ?
Dr Strangelove
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The majority of claims are from stress and back pain AFAIK.
LDFerguson
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Don't mix up Income Protection (sometimes called Permanent Health Insurance) with Specified Serious Illness (sometimes called Critical Illness).
Income Protection covers you for an ongoing income if you cannot work due to illness or accident. Usually there's no list of illnesses. Any illness that is severe enough to render you unable to do your job for longer than the waiting period is a claim.
Specified Serious Illness cover pays out a lump sum if you are diagnosed with one of the Specified Serious Illnesses. So there is a list of illnesses for this type of cover. The big ones are common to all policies, e.g. heart attack, stroke, the more serious forms of cancer, but the insurance companies differ on the number of rarer conditions covered.
Income Protection covers more illnesses, for the very reason that there's no list.
Regards,
Liam
www.FergA.com
LDFerguson
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Yup. And cancer. In 2023, Irish Life paid out over €60 million on over 3,000 Income Protection claims. Top three causes were (1) Mental Health, (2) Cancer and (3) Musculoskeletal.