The new government has many ideas, but much of what they plan is based on a simple concept that too many people are passive. Over the last two decades, we have been bombarded with new laws, information, advice and much more, often from self-styled experts with no real experience of life. The belief is that we have become institutionalized, and expect the state to do everything for us.
This nanny-state mentality has many forms of pettiness and makes us forget that we actually are the state. The new coalition has had to explain that the more the state does, the more we as people, have to pay the state. Unfortunately, due to economic mismanagement and bank greed, we can no longer pay for all the things we were taught that the state would control and pay for. The money box is empty.
In the new era of personal responsibility, if we get ill or injured, we can no longer expect the state to pay us more than the bare minimum. So if you want to protect yourself and your mortgage against the risks of illness, accident and unemployment, you will have to buy your own income protection insurance.
Income protection insurance pays you an income if you become unable to work due to sickness or injury. Some policies only pay for mortgage costs, while others just protect specific loans or credit cards. Income protection is an insurance policy that provides you with a monthly tax-free payment if you cannot work due to accident or sickness. It is designed to cover the cost of your essential outgoings such as mortgage, loan and credit card repayments, food, utility bills and council tax. The maximum amount available will depend on the policy you choose but is usually the lower of a fixed sum or a percentage of your earnings; such as up to 60% of your normal gross monthly income.
Many short and long-term covers can be bought online from insurers or from specialist providers. Short-term income protection covers are designed to help if you have a short-term illness, and usually only cover you for up to 12 months. Long-term ones cover you for many years.
Until recently, most people bought their cover from a bank, but official and unofficial reviews have proved that anything offered by your bank or loan company will usually be overpriced, cover for a short period and often not suitable.
The banks have been accused by official bodies of making huge sums on commission from payment protection insurance, and in the future they will be banned from selling such cover at the same time they sell you a mortgage or loan.
Despite two years of intense bad publicity, the thick-skinned banks have fought long and hard rearguard actions to protect how they sell this cover and the money they make.
One of the key defenders of the faith has been Lloyds banking group, including Lloyds, Halifax, Bank of Scotland and TSB. Suddenly, with no warning, the group has abandoned the bunker mentality and ceased to sell such covers. A scarcely believable excuse is that “it does not make enough money". The sudden surrender is almost as total as England during the World Cup; perhaps they too are 'tired'?
All we need now is for all the other banks and building societies who fought court cases against rule changes, had massive fines for mis-selling, fought the Financial Ombudsman and regulators tooth and nail on changes – to give up too.
The need to search for cover that suits you is greater than ever.
Income protection insurance: Hot topic: August 2010