Pension, life insurance, health insurance
I knew that when I left my previous large employer, I’d have to take care of some personal financial matters which they had previously looked after. But I wasn’t sure of exactly what; all the different kinds of financial products were a bit blurry in my mind. It turns out the answer is:
- Life insurance
- Health insurance
- Income protection insurance (also known as ‘permanent health insurance’)
- Pension
Not to be confused with:
- Critical illness cover
- Mortgage payment protection insurance
What are all these things about? Pension is obvious. And, so far, has been pretty straightforward – I just wrote to my pension provider explaining the situation and they sent me back a Direct Debit mandate to send back. I’ll then be paying for my pension from within the company.
Health insurance is also obvious – BUPA or similar – I have not signed up for this and don’t intend to do so any time soon. I am never convinced that, unless you pay for a really expensive plan, you’re likely to be covered in any given situation. It seems to me that most health insurance policies exclude both chronic and acute conditions, which doesn’t leave much in between.
Life insurance is nice and straightforward too; they pay out if you die before the age of 60 (or whatever age you choose). You choose the payout you want your family to have (e.g. £100,000); the premium is guaranteed for life, and there’s really not much debate about whether you’re dead, so you don’t need to consider very much except for price.
The rest are a little more confusing. Income Protection Insurance pays out an income until you’re (for instance) 60, if you are unable to work for medical reasons. Again, the premium is guaranteed for life. You can choose your income level (e.g. £1000 a month), and the deferral period before which they start to pay out (e.g. 90 days).
Some income protection policies only pay out for a year, not the rest of your life. Some of them also cover unemployment for non-medical reasons.
One consideration with income protection insurance is the definition of “work”. Some of them define work as “your current job”, some of them define it as “your current job or any similar”, and some of them as “any job”. This could make a difference if, as a programmer for example, you get bad RSI and can’t type. With some policies you could retire. With others you would have to become a gardener or something (which sounds quite appealing but that’s not the point).
(Note to self: must investigate whether there’s money in gardening if Macrobug doesn’t work out. Doubt it!)
Critical Illness Cover is, seemingly, similar, but it’s not related to your employability… it just pays out if you get certain illnesses. They’re on a defined list. I have been advised that I probably don’t need this, unlike Income Protection Insurance which I really ought to have.
The last one, Mortgage Payment Protection Insurance, pays your mortgate if you are unable to do so, for health or unemployment reasons. So there’s a bit of overlap with Income Protection Insurance but that’s OK. Like most people I organised MPPI when I got my mortgage, although not with my mortgate lender as that was a rip-off.
It’s taken until now to finally work through all these things and set them all up. I’m not even quite there yet with the Income Protection Insurance but it won’t be long.