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Income protection insurance/benefit?

Discussion in 'Personal' started by goosey200, Dec 14, 2019.

  1. goosey200

    goosey200 New commenter

    First time, single buyer here and totally confused!
    I’ve been advised by the mortgage broker I’m using that I should get income protection benefit and/or mortgage decreasing life insurance once I buy the house. It sounds very useful, especially as the sick pay benefits at school (primary state/academy) last barely 12 weeks.
    However, the quotes I’ve seen are ridiculously high!
    Is it really worth it? Am I likely to get better quotes through the union (apparently ‘teacher’ is a high risk category due to risks of mental illness...)
    Everyone I speak to at work, who says they don’t bother are those who have a spouse’s income to rely on.
    Many thanks in advance
    LondonCanary likes this.
  2. cheesypop

    cheesypop Senior commenter

    When I bought my first house, I was on my own. No partner, no children.
    I was advised not to bother with life insurance, because if I died it didn’t matter (in the sense that the house wasn’t anyone else’s home, it could be sold to pay off the mortgage). However I was very much advised to take out critical illness cover, in the event that I got something that didn’t kill me but left me unable to work, I would need my mortgage paying off.
    If you have a repayment mortgage, you can get cover which goes down in value as the amount you owe on your mortgage goes down, which is cheaper than cover for the full amount that stays worth the full amount (if that makes sense).
    I was also advised not to take out any general ‘illness’ policy because teaching sick pay was probably more generous than most policies.
  3. phatsals

    phatsals Established commenter

    If you work in a state primary you earn entitlement of up to 6 months full and 6 months half pay. Again, if you're employed and paying into TPS you are covered by life insurance if you die.

    Only you can decide, but the devil is often in the detail, for example, if you pay for the extra insurance, how long would it take to kick in? Quite often it's 90 day, 3 months. It also is time limited, they don't keep on paying out forever, possibly a year. If you put the equivalent money to one side for a couple of years, you may well have enough to cover yourself in the case of an emergency.

    It's not something I've ever bothered with, when I was out of work I paid interest only on my mortgage until I was back on my feet.
  4. mothorchid

    mothorchid Star commenter

    Is your mortgage broker an independent one or is he linked to any firm - either estate agents or financial. In either case, he will be getting some sort of commission if you buy this.
    Get further advice - ask your bank, ask an independent financial advisor, even ask another mortgage broker. The premiums shouldn't be that high - your sick pay ought to be 100 days full pay and 100 days half pay, if you're a state school (maybe you're and RQT and it builds up to this over a few years?) and I have a sneaky feeling you're being mis-sold something.
  5. sooooexcited

    sooooexcited Occasional commenter

    You definitely need it. No one plans for major illness/injury/mental problems/redundancy.
  6. Mangleworzle

    Mangleworzle Star commenter

    Independent financial advisors get commission too. They can choose from many providers unlike tied agents but are as prone to mis-selling (much rarer these days) and over-selling (as common as ever) as any other agent you may encounter.

    Life insurance is unnecessary if you don't have dependents, lenders used to insist on it but most haven't done so for many years.

    Income protection should fit in with what you have from your employer which if you're a teacher should be full salary for 6 months and then half for 6 months before falling to state benefits (you may have to work for two years though before this protection kicks in), and shouldn't be too expensive if you are in good health and young enough to get a mortgage. This is designed to replace your income to a degree, but not so much that you're better off not working.

    Critical illness pays a one-off lump sum and can pay off the outstanding mortgage if you get a life-threatening illness, though one you could recover from (or remain debilitated for life), it pays out once and is more expensive. They aren't always decreasing (in line with outstanding mortgage) and may be set at the initial amount all the time which makes them more expensive.

    Whether you need them or not depends on your own personal assessment of risk.

    Redundancy cover is something else and usually will only cover you for a short time period, the expectation is that you will get another job within a few months.
    mothorchid likes this.
  7. lindenlea

    lindenlea Star commenter

    We had this insurance for the first few years of the mortgage but once our incomes were healthier we let it lapse. You might say money down the drain, but it was reassuring at the time. It's very personal. If you were self employed it would be far more important.
  8. Bedlam3

    Bedlam3 Star commenter

    If your mortgage allows you to take payment holidays this might be cheaper than taking out the insurance.
  9. jubilee

    jubilee Star commenter

    The OP works for an academy. The sick pay entitlement will be lower than for an LA paid teacher, even if the OP had years of LA service prior to taking the academy post. You start from scratch with sick pay entitlement when you sign an Academy contract. Generally you have no entitlement at all until completing a year of service.
    We had a poster some years ago who took up an academy promotion after 24 years in an LA school. Early in the Autumn term she was diagnosed with cancer and discovered that she was high and dry as regards occupational sick pay.
    The OP should consider how the mortgage will be paid if sickness were to go beyond the 12 weeks' entitlement that they currently have for sick pay.
    A sickness/accident policy will be cheaper if any payout is not triggered until the 3 months of occupational sick pay is used up.
    A member of my family bought a flat in London 2 years ago. They decided against a policy as they has a spare bedroom and could generate enough to almost cover the mortgage by taking in a lodger.
    They also had a 6 month entitlement to full sick pay at work and had almost used that up this year after a diagnosis of cancer and other medical issues. Now back at work, they have not been in a position where a sickness policy would have had to pay out anything but they would have had to fund the mortgage from savings had their recovery taken longer.
    A critical illness policy would have paid out a lump sum over 6 months ago but doing competitions whilst on sick leave actually generated a bigger cash prize!
  10. Laphroig

    Laphroig Lead commenter

    Watch out for the small print. Recent report on Moneybox had the case of a self employed chap with critical illness cover who claimed when he had a heart attack but was refused because he had had a cardiac arrest instead.
    mothorchid likes this.

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