Income Protection Case Study | Jeffrey

Income Protection Case Study: Jeffrey

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Income Protection Case Study Jeffrey

Background:

Income Protection | Typical Case Study

Income Protection Case Study: Jeffrey is age 38, a Chemist, non smoker & earns £48,000pa salary (around £3,000pm after tax). He is married with 2 children & the main breadwinner. Jeffrey has £8,000 savings in an ISA. His usual various outgoings = £2,000pm & the rest for other things. He says his wife intends to go back to work part time.

His mortgage is jointly insured with both life insurance & critical illness coverage, so if either he or his wife were critically ill or upon death, it could be repaid fully. His employer provides him 2 x death in service plus sickpay cover upto 3 months but then it is statutory sickpay.

Jeffrey is a reasonably fit person with no health issues currently & no family history of heart disease or raised cholesterol. He is more than aware if circumstances change however, his dependant wife & kids family will find things tough. 

Enquiry

Jeffrey logs onto the internet looking for professional advice. He firstly looks at what does MSE Martin Lewis say about income protection and their pro’s & cons. Then later on looking for more professional advice, makes an inquiry through our own website about Income Protection PHI.

We call him back at a convenient time, which he is pleased about. We then explain who we are and have a good chat about his current situation, requirements & needs. After a fair & personal analysis, Jeffrey just wants currently to look at PHI for now. After checking the family budget, he gave us an affordable £30pm to plan his insurance needs or £1 per day.

Income Protection Case Study | Advice & Recommendations

Jeffrey listens to our advice & thought process about PHI Insurance. The importance of it being on an own occupation basis ie; paid if he cannot work anymore doing his own job role as a chemist. Also how the policy benefits are calculated usually upto 65% of gross salary but then paid tax free. The difference between cheaper age costed reviewable premiums versus none reviewable.

We explain how the waiting or ‘deferred’ period works & how a shorter period increases the price. Jeffrey thinks he needs PHI Insurance covering his main outgoing only ie; £2,000pm. He wants it paid after 3 months ( to dovetail his work ) but after several quotes, limited to 5 years per claim [ due to budget constraints ] with the policy running upto current State retirement 68.

He understands that unlike his joint critical illness plan, this PHI insurance will be in his sole name, is far more extensive, so may cover any accident, illness, hospitalisation plus most physical & mental issues.

We check the Insurers in the marketplace offering PHI off our panel given the above considerations. It so happens for this Income Protection case study, we recommend the same Insurer he still has an old Pension with, which he is happy about. The initial PHI Insurance quote came to just over £30pm.

We email him a copy of the Insurers Key Product Features & specific PHI quotes plus our own legal disclosures. Then via our Life Insurance Broker systems we help over the phone to complete the Providers application form asking him relevant questions re health eg; ever diagnosed high cholesterol, lifestyle issues or a family history of heart disease etc;

Shortfall Options

In this Income Protection case study process we discussed & actually recommended for Jeffrey the following to consider to fully address his shortfall. 

• Option of slightly cheaper reviewable / age costed premiums. That meant the price would go up yearly as he got older, which he did not want. 
• Around maximum allowable by Insurers for PHI Insurance given his gross income = £2,400pm benefit. This was too expensive.
• The PHI policy paid full claim upto State retirement 68 ( not just 5 years per claim ). This was more costly.
• Have the plan index linked to help offset rises in cost of living & rise in wages. He just wanted fixed costings in future, as unsure about any salary rises.
• The premium costs for the most comprehensive cover came to £60pm [ or £2 per day ] but he could reconsider if his wife goes back to work.
• Jeffrey discounted all these various options in this Income Protection underwritten insurance case study
• In due course, we recommend to also consider Family Life Insurance for himself & maybe his wife
• Lump Sums or Family Income Benefits options for this

Income Protection Case Study – Conclusion

Jeffrey is pleased to have some additional backup plan, rather than nothing after 3 months sickpay. He understands the shortfalls above we identified though. We help arrange his PHI income protection insurance cover via a Broker deal with his Insurers & then send him a fully documented report afterwards explaining his various demands & needs.

He says it’s OK for us to make a note to recontact him in the future re this matter & also checking any major salary rise impact on this PHI cover.  

Income Protection Example Case Study | Article by Martyn Spencer Financial Adviser

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