Cheap Ways To Protect Your Income, Health, And Your Family!

Here are some excellent-value alternatives to payment protection insurance, life assurance and medical insurance.

Financial companies have a rule: the worse a product is, the more they talk about how great it is. More precisely, such products may or may not be poor, but for sure they'll be over-priced and making them fat profits.

Conversely, there are always products that are great value that you never see promoted in adverts, and are rarely recommended by advisers. One obvious example for keen fans of The Fool is index-trackers, which are cheap, simple and reliable investments.

There are other cheap products that are often not just perfectly suitable for many people, but excellent value for money as well. Today, I'm going to compare and contrast three aggressively-sold insurance products with their value-for-money equivalents. One protects your income, the second your health and the third your dependants (your partner and children).

Protecting your income

Consider getting Income Protection (IP) instead of Payment Protection Insurance (PPI).

Income protection is designed to pay you benefits when you're out of work, regardless of the reason. Like all insurance, the policies vary between providers, but typically you get good cover.

PPI is to protect debt payments during periods of accident, sickness or unemployment. When you buy it from your lender (be it for a mortgage, credit card or personal loan) it's vastly expensive, and the exclusions are onerous.

Recently, research company defaqto said that income protection had poor sales because of provider apathy. This almost certainly means that it is great value for money, because providers would not be apathetic if they made a whopping great profit from it. Instead, you'd find them cross-selling it alongside loans, mortgages and household insurance.

Incidentally, PPI is one of the most heavily and aggressively cross-sold products there is. However, if you're interested in protecting just the repayments for your personal loan or mortgage, not your income, you can get much cheaper PPI cover if you buy 'stand-alone' cover, instead of buying through your lender. Read more in Ditch Your Rip-off Protection Today!

Protect your health

Consider a healthcare cash plan (HCP) instead of private medical insurance (PMI).

Health or medical insurance is far better value for money than buying PPI normally is. In fact, there is evidence to suggest that it pays out around 77p in claims for every £1 taken in premiums, which would make it one of the best value-for-money insurances available. To compare, household insurance pays out something like 55p per £1 taken and PPI just 20p per £1!

Even so, if you find medical insurance expensive, you should consider the cheapest form of it: healthcare cash plans. These cover such things as physiotherapy, chiropractic, sight tests and dietary advice. Some also cover alternative therapies and even contribute a little bit of assistance towards critical illnesses.

You can read more tips on both private medical insurance and healthcare cash plans in Private Medical Insurance: Is It Worth It? and Policies That Really Pay Off.

You can get both private medical insurance and healthcare cash plans, complete with free advice, through our Medical Insurance centre.

FIB instead of life assurance

Consider family income benefit (FIB) instead of life assurance (which is the same as life insurance).

Life assurance, like private medical insurance, is a useful and Foolish product. This one pays out a lump sum to your dependants when you die, if you die during the policy term. (You can also get life assurance to pay off your mortgage for your dependants.)

Rather than supporting them with a big lump sum, which they might not know what to do with, you may be more comfortable if your policy gave them a monthly income for an agreed period of time, perhaps till the date you were supposed to retire. This is what family income benefit is for. It can be index-linked, so that it goes up each year with inflation (rising prices). The best part is that it's usually quite a bit cheaper than life insurance!

A note to penny-pinchers about the six insurances mentioned in this article: the cheapest policy might not be the best, so be sure to look through the small print. The two questions to consider are: Does it cover you? and Does it suit your needs?

Some examples of why these policies might not be suitable are:

• You might not be able to claim on an income protection or payment protection insurance policy if you have the wrong occupation.
• You won't need life assurance or family income benefit if you have no dependants.
• You might not need private medical insurance or a healthcare cash plan, because your employer already covers you, or because you're actually quite satisfied with the NHS!

I introduced this commentary by saying that poor value products are shouted about the most. But you haven't heard about these three alternative insurances, have you? Exactly.