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 Post subject: Income protection insurance and critical injury insurance
PostPosted: Fri Nov 09, 2012 8:06 am 

Joined: Fri Nov 09, 2012 7:03 am
Posts: 2
Hello all.

I have been to see a financial advisor this morning to discuss investing some inheritance. The plan to invest in equities on the stock market was perfect but alongside they were very keen for me to take out income prtection insurance and critical injury insurance. The main selling point was that If I take it out now the premiums will be lower.

I'm in my mid 20s, healthy, with an average paying desk job. I have no dependants or a mortgage to pay.

Do people think the insurance is worthwhile? Do people have any experience with these insurance products themselves? Are there figures on the probability of sustaining a carreer ending injury or illness?

Cheers
Gareth


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 Post subject: Re: Income protection insurance and critical injury insuranc
PostPosted: Fri Nov 09, 2012 8:30 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
are you in the US or UK? I can only speak for the US.

You question of the probability of a career ending injury or disability is a good one. And when trying to answer it, you'll find the inherent problem of finding a good policy. I've always referred to it as "disability insurance" But, the fundamental question is, what does it mean to be disabled, or as you put it, a career ending illness? Opposed to life insurance, where it is rather cut and dry, disability insurance is a huge gray area. For example, say you're a surgeon and in your upper 30's and your hand becomes unsteady. The hospital picks up on this and won't let you operate. You're healthy and in great condition, but you can no longer do what you spent all these building up to do. So, are you disabled? We can all go back and forth all day about yes or no, but what really matters is what the policy says. So in essence, not all policies are created equal.

First, however, you need to decide what your plan is if you can no longer work because of sickness or injury. Do you move back in with your parents and mooch off of them the rest of your life? Perhaps you have a partner/spouse who will work and take care of you? Will a gubimint program take care of you? But, the important thing is to not buy the insurance unless you need it. Certainly, if you die, you don't need to worry about shelter and how to feed yourself. But, if you become disabled, you're still here and you need to worry about how to keep yourself here. Being "single" you probably only need a little, but that is for you to decide. Obviously, if you had dependents, it becomes a bit more clear. While it is true it will be a lot cheaper if you buy when you're younger, you'll save money only buying insurance in the appropriate amount and when you need it.

Then you need to decide what policy covers you the best. In the US, Guardian is considered to be the "gold standard" and who carries my disability policy and most policies for people like our surgeon above. I believe mass mutual also has a pretty good policy. They'll ask you if you have any disability policies at your employer, and the answer is most likely you have a crappy policy. You cannot be insured over your current compensation.

Anyway, if you see there is a need, there is a ton more information out there. I believe I have a post on my neglected blog which details the neat things guardian throws out there in their policy. I can answer questions as well, but ultimately, you'd probably be better served not buying a policy from your financial advisor or anyone they'd recommend. You'll need to find a good insurance agent and they'll walk you through the process. I know there is a lot of overlap these days, but I prefer a dedicated insurance agent.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Income protection insurance and critical injury insuranc
PostPosted: Fri Nov 09, 2012 8:57 am 

Joined: Fri Nov 09, 2012 7:03 am
Posts: 2
I am in the UK.

Given the scenario of the surgeon my response would be.
He wouldn't be able to do his chosen career but he would still be able to work. I'm very sceptical about the insurance for that reason.

There are many scenarios for being out of work or on long term sick due to ilness or an accident. There are many scenarios that would be hard and mean a change of circumstances. But I struggle to see a probable career ending scenario where I could make a significant claim.

My thoughts are to invest the £30-£50 a month rather than take the insurance. Put it along with my other monthly savings/investments and then in 15-20years review the situation.

Thanks for the reply and advice. Especially the idea of going through a specialist in insurance.


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 Post subject: Re: Income protection insurance and critical injury insuranc
PostPosted: Fri Nov 09, 2012 9:07 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
Again, with the surgeon, it doesn't matter what you think, it matters what the policy says. My policy says if I have a condition which reduces my pay 15% (I think that is the number...), I am deemed to be totally disabled. Say my back goes out playing soccer next weekend and I am unable to remain stationary at a desk or, as my work requires me to travel, I can't do an airplane flight. Perhaps a job mopping floors at McDonalds is much easier on my back than being stationary in front of a computer or sitting in a plane, some policies will say you are disabled, some will say you are not. But, I'd take a huge paycut at McDonalds.

We don't know what we don't know. It's illogical to think it won't happen to you because you can't fathom a possibility.

Anyway, the important thing is to assess the need right now, and it seems like you have another plan if you can't continue to perform your duties.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Income protection insurance and critical injury insuranc
PostPosted: Fri Nov 09, 2012 10:54 am 

Joined: Tue Oct 23, 2007 7:07 am
Posts: 201
Just a note regarding physicians and disability insurance as I think they are somewhat unique. My wife is a surgeon and we are currently in the process of obtaining disability insurance for her. More so then a "regular" job, a surgeon has a serious investment in their career (both time and money) and a simple issue as you stated can make it so you cannot earn what you have worked hard to be able to. You might still be able to practice as a physician but likely doing something that pays much less. That is a big deal when you dedicate a decade or more of your life after undergrad and potentially hundreds of thousands of dollars in education and even more in delayed earnings during residency. And like you stated BF, it is extremely important how the policy is written and how things are defined.

For more regular Joes, I think some sort of disability insurance is necessary but to a much lesser degree and certainly not the same type of policy.


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 Post subject: Re: Income protection insurance and critical injury insuranc
PostPosted: Fri Nov 09, 2012 11:47 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
It should also be pointed out that the issuer of the policy will grade your policy based on your profession. It is very much aware of the surgeon issue and the high probability that something will happen and the policy will "pay out." In turn, premiums are much higher.

So, perhaps, if one was to take out the same policy as a surgeon, they could very well be over-insured. But, you never know until shit hits the fan. For me, it makes much more sense to have the protections than to have something that will most likely never pay out unless I suffer dismemberment or a terminal illness. But, if it is just a small difference over the lesser policy, I'd definitely go for the security.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Income protection insurance and critical injury insuranc
PostPosted: Sat Nov 10, 2012 9:00 am 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5293
Two observations:

First off, I agree with what has been said about disability insurance. Most people are far more likely to be disabled than to die. Disability is generally a good idea. But I know nothing about how it works in the UK.

Second, I am bothered that your financial planner is trying to sell you insurance now. If it were me I would do my own research to determine your insurance needs. If you believe you need insurance then buy it from someone else, NOT this firm. If they have your best interests in mind they should not have a problem with that.

I'm not suggesting you buy disability insurance but if you do, don't buy it from those sharks.


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