In a supremely self-sacrificing act, one Fool risks the wrath of the Head Fool to tell you some more about protecting your outgoings from accident, sickness and unemployment.
As any long-serving Fool knows, we don't like payment protection insurance. I don't like it. Cliff D'Arcy, one of our regular writers, definitely doesn't like it. And Bruce Jackson, our managing director, hates it so much he said he does not want to read another article on the subject.Oops.
So, before the now imminent termination of my contract, I'd like to add a few more facts and pointers to the usual PPI message that is: "It's naff and expensive, so forget about it."
Firstly, the FSA has now announced that it's planning to force companies to offer pro-rata refunds on cancelled policies. At present, some companies offer no refund at all after, say, six months. So the FSA move is good! Now they just need to sort out the 80% profit margins, the mis-selling practices, the non-existent effect of competition on prices, and the poor terms and conditions.
In the meantime, perhaps you should consider another way to protect your outgoings -- non product-specific cover, which is usually called 'income protection'. This is paid into your account, rather than direct to your mortgage provider, loan provider, or credit-card company.
Broadly speaking, there are two types of income protection:
Short-term income protection
These are usually annual policies, paying a monthly amount for up to twelve months if you have an accident or are sick, plus unemployment is usually covered too. It's essential to read the small print thoroughly, as there can be some surprising exclusions, particularly for people who are already ill, or are self-employed.
Take a look at this table, based on a 30-year-old male who's chosen to receive £600 of monthly benefits:
Provider | Monthly premium | When you start getting paid |
|---|---|---|
payprotect | £18.95 | 60 days |
payprotect | £22.95 | 30 days |
British Insurance Limited | £25.00 | 30 days, backdated to day 1 |
Burgesses Limited | £25.00 | 30 days, backdated to day 1 |
The Post Office | £27.00 | 30 days, backdated to day 1 |
paymentcare.co.uk | £27.50 | 30 days, backdated to day 1 |
Long-term income protection
This is often called 'permanent health insurance', as unemployment isn't normally covered and these policies keep going until, say, your 50th or 60th birthday. You can get premiums that are fixed for the length of the policy, or ones that the insurer can review - and increase. Unlike short-term policies, you can make as many claims as you need.
It's easy to tell the short-term and long-term policies apart, as the former will give you blanket policies, whilst the latter are tailored to your job, health and so on, and they will specify an age that the policy stops. As a result of this, and because unemployment isn't covered, these policies can be somewhat cheaper. The Fool's own income protection comparison engine found that the same 30-year-old male, who's a non-smoker, and who wants £600 of benefits a month, could get a fixed premium for £12.65 through Liverpool Victoria.
So, if you're concerned about accident, sickness or unemployment, there is affordable cover to protect your outgoings. Do you think they'll cover an outgoing writer who's disobeyed the Big Fool in the sky?
Compare insurance via The Fool.