Am I over insured and paying policies I can’t claim on?

I earn £26k gross income per annum with up to £5,000 (unguaranteed) bonuses per annum. I work for a large company that provide 6 months full sick pay then 6 months half.

I was advised in 2002 to take PHI for £800 pm with a 6 month deferred period and an PPI policy for unemployment for £753 pm. A year later another I was advised me to take another PHI policy giving £794 pm.

My income at this time was also £26000. I need to know where I stand and what to do about the polices, because I have a large shortfall in mortgage life and critical illness and no LC cover and CI over and above this, and this money could be used on these needs as I am married with 2 young children.

Question asked by Ritu Singh
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Answered by Tom Conner

You may benefit from a review of your current policies

I think your current cover needs to be reviewed properly as there is the potential to be over-insured. Different insurers have different limits as to how much you are able to cover, which ranges from 50% to 70% of gross earnings.

The value of advice

I think it would be best to run through properly with an adviser. The adviser would need to know which insurer(s) you are currently with so they can calculate the maximum you could cover. As you have 6 months full sick pay and 6 months half pay the adviser would also need to calculate how much can be covered under the first policy, which again would depend on the insurers income limit.

Reviewable or Guaranteed premiums

Whether the premiums can increase over time will depend on whether you have reviewable premiums (where the insurer has the right to alter the premiums) or guaranteed premiums (where the insurer does not). Your policy document should state which method is used.

Given the new EU law stating that both women and men have to pay the same insurance premiums, it is worth reviewing your cover now anyway because the PHI pricing women has fallen by around 25%.

Please feel free to call us to run through with an adviser.

income protection
 
critical illness
 
over insured
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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