to think income protection insurance is a con?

[gertrudestein]

DH and I are buying our first house after renting. The mortgage is roughly 50% of our rent (rental prices are crazy round here and we're lucky enough to have a decent deposit), which is handy because I'm just about to give up work to have our first DC.

The mortgage broker wants us to buy income protection for around£50 a month. We're tightening our belts at the moment and that's a lot of money to us. I don't want to do it because:

1. I'd rather save some money which we can use in case of any emergency, rather than spending money on something which might not happen
   

1. We have a 50% deposit, so if it came to the worst we could sell the house, pay off the mortgage and move elsewhere.
   

1. We have managed to find the rent every month, even during illness/ family tragedy etc., and don't think we will have difficult paying the mortgage for a short period in an emergency. Somehow, paying £600 a year for something that might not happen seems more wasteful.
   

Obviously, we are saving money on the mortage v. rent, but we'll also be making less money for at least a year while I stop earning.

AIBU to think that income protection a bit of a con, or am I being naive and is it actually a very good idea?

[edwinbear]

I think it depends how secure your dh's job is. If he feels reasonably secure you can probably save the money in a rainy day fund. But if there is any chance he may lose his job, I would personally take it. How long could you pay the mortgage without his income? You may be able to move but would you want the stress and to pay fees/stamp duty etc again?

[StinkyWicket]

Well, we took it out when we got our mortgage, and 5 years later we're claiming on it.

We've spent maybe £1200 over the five years and if we claim back the full 12 months we'll have claimed back £2640, so for us it's ok.

I think under your circumstances it probably wouldn't be necessary. We have an 85% mortgage.

My job is very secure though so I may cancel my portion of it, we are claiming on DHs half at the moment.

[StinkyWicket]

Why just her DH edwin?

[NumericalMum]

YABU it is not a con. It can be lifesaver for some people. If your DH gets a long term illness and can't work what will you do? Not just a cold but say cancer or motor neuron disease or MS?

And do you really mean income protection?

[edwinbear]

Because she is giving up work to have dc. OP are you resigning or going on mat leave? Sorry, when you said giving up work I assumed leaving. Obviously if you are going on mat leave then yes, you need to consider your security of employment as well.

[NumericalMum]

Income protection usually only covers working people. There are homemaker type covers but they are rare. Tbh OP £50 a month seems a lot. Shop around!

[StinkyWicket]

Oh missed that bit!

Our income insurance just covers unemployment I think - actually I will have a look at the policy as I got a critical illness quote the other day and it was £70 per month

[SecretNutellaFix]

My DH took our mortgage out 10 years ago with a secure job in his company.

Last June he was made redundant. Luckily he found work very quickly, but that insurance we took out meant we had one less pressure on us when we didn't know if he would find work quickly.

[StinkyWicket]

We got ours free for the first 3 months BTW. I would probably shop around a bit if the mortgage advisor is suggesting (eg) a Woolwich policy for a Woolwich mortgage. They should be doing the shopping for you.

[HKat]

It's not a con. The product itself is sound - the recent publicity is a result of poor selling practices. To the right person it's a good policy.

[edwinbear]

It's also worth considering what any redundancy packages from work would be like and the likelihood of finding new employment before any redundancy/savings run out.

[gertrudestein]

Thanks Edwin & Stinky - that's very interesting.

We're both self employed, running our own businesses so things are not exactly secure. But on the other hand we are in control of our destinies, and can normally increase our workload/ income at short notice if we have to.

Moving probably seems like an ok option at the moment because we've never owned before, but it could well be a lot harder once we're actually in our own home.

[ShellyBoobs]

I'd try somewhere else other than your broker.

Almost guaranteed to be cheaper with someone else.

[chicaguapa]

I think to call it a con is BU. It's like any insurance. You pay for it, but hope you won't need it. But if you think you'll manage without don't buy it.

[edwinbear]

If you are both self employed, please check the details very carefully. Some of these policies can be a bit funny about self employed and levels of income etc. I say that as someone who works in a bank.

[gertrudestein]

Thanks for all these really helpful posts!

I think it sounds like we've got quite an expensive product, but that in principle its not a bad idea.

Can I ask, does anyone have critical illness as well? We are being sold both, but of course that doesn't include insurance for the inherited critical illnesses in my DH's family, which is the most likely cause of trouble!

[gertrudestein]

Hmm ... the self employed thing is starting to sound a bit fishy. I'm just going off quotes from the broker at the moment, but will ask to look at the paperwork in detail

[ShellyBoobs]

We have critical illness cover and it was very reasonably priced.

I think it's with Legal and General.

[edwinbear]

Yes. DH and I have life ins with critical illness, it costs us £150 a month, the vast majority of the premium cost is the critical illness element, it is especially high for DH as he is an occasional smoker. For us, the critical illness was our biggest concern, although it does stick in my throat a bit paying that sort of amount each month. We don't have income protection, we would have needed to pay far more than £50 a month given banking is a high risk profession for redundancy at the moment and we are both bankers. DH was made redundant last year but he had a big pay out after 25 yrs service and found work within 3 months so that wasn't as much of a concern for us. Again, with critical illness cover, do check what illnesses are covered, they differ vastly. Some, for example, don't cover breast cancer as they argue survival rates are now so good it is not necessarily 'critical'.

[gertrudestein]

Thanks Edwin - just looked at the quotes again and realised that it's actually £50 each! And £100 is a LOT of money to guarantee a mortgage of £800pm, not to mention for two people who don't even pay the 40% tax rate. It actually puts it in perspective if you and your DH are both in banking jobs and only paying £150 for income protection and critical illness.

It could well be our self employed status that is pushing up the price, but I will definitely shop around and can now ask some better informed questions.

thanks, everyone!

[tomme]

Definitely check what level of income they will cover if you are self employed and what evidence of earnings they need, banks and certain brokers are notorious for miss selling to the self employed.


But I would definitely recommend you seriously consider income protection and critical illness cover, Just shop around first.

[edwinbear]

That £150 is just for the life and critical illness, income protection as well would have been far too much. But yes, definitely shop around, and it's worth even asking your broker if he can offer a discount, they sometimes have the ability to. Good luck with the move and the baby.

[tomme]

A decent IFA would be able to help you, ask your friends/family if they could recommend one.