We have all done it, thought about buying something and have not really had the time to research it properly. So we say to ourselves,’ it looks ok and as I don’t really have the time right now, I’ll just buy it, I expect they are all about the same.’ The skim researcher will do a little more. They are likely to pick a known brand, look for a best buy recommendation and go for something fairly mainstream. Then for added comfort say “If lots of other people have bought this one it must be alright.”
For buying a washing machine or a TV, this will probably work out to be good enough. Price and appearance of a physical object are easy to assess. However, when it comes to buying a service or an insurance product it is a very different matter. Service is all about the reputation of the company for how they deliver that service. Take airport parking for example, hundreds of people go through the same process every day and customer feedback is readily available. So you know what you are buying and what to expect.
With Insurance you are buying a promise. You are lucky to get more than a few pieces of paper and a leaflet in exchange for a significant sum of money disappearing from your bank account each month. Worse still, from a customer feedback viewpoint, it is notoriously difficult to get any realistic idea of what their customers think. This is mainly because the majority of people with insurance policies simply don’t want the service the insurance company offer, as this will mean some disaster has befallen them. To think the happiest customers are those who have paid for the product and have received nothing in return! At least nothing except the peace of mind that should something go wrong they will not be faced with anything from a large bill to financial ruin.
The majority of us need to work to earn enough money to support our family and to pay the bills. Most people scale their lifestyle to their earnings and should their wages stop coming in every month, they are very soon in serious financial trouble. This is mainly because, particularly for people starting out in life, first time buyers and those with young families, there is very little opportunity for saving. Regular outgoings take virtually everything and having thousands of pounds sitting in a bank account is simply beyond most people.
For anyone with little or no savings and worried about how they could cope if they were made redundant, Unemployment Insurance can offer an alternative. It is much easier to pay £30 to £40 a month to an insurance company than it is to save up, say, £12,000 to meet financial commitments for up to a year. When I thought it would be sensible to insure myself against the risk of unemployment, I wanted enough cover to at least pay the bills so I would avoid credit blacklisting whilst looking around for another job. At the time it became more urgent to get cover as friends who had been made redundant remained out of work for well over 6 months. So I made the classic mistake of rushing to buy a product that was not quite what I needed and at the wrong price.
Learn from my experience. Here are my ten tips to choose the right cover at the best price.
1. Know what the product is called. This may seem pretty basic however most providers do not name their products Unemployment Insurance. Nor do virtually any of them call it Redundancy Cover, even though this is what most people want to buy. Look for ‘Accident, Sickness and Unemployment Insurance’, ‘Income Protection’ (short term) or ‘Lifestyle Protection Insurance’. Just to confuse matters, full term Income Protection Insurance does not cover unemployment, it is for long term disablement until retirement. Don’t spend time researching the wrong thing.
2. If you are mainly looking to cover your mortgage repayments and perhaps up to 25% more for other household bills, you will find better deals by examining Mortgage Payment Protection Insurance (MPPI). This is widely available and therefore the most competitively priced. If you need higher benefits, or are paying rent rather than a mortgage, look for a virtually identical short term Income Protection or Lifestyle Protection policy.
3. Do lots of on-line research, don’t worry about the detail at first, just get an idea what premiums are charged for a given level of cover. The comparison web sites are particularly useful as they compare ‘apples with apples’. Money Supermarket looks to have the largest number of low cost direct to public providers. See their insurance section for the ‘Mortgage’ and ‘Payment’ options.
4. Stick with the big brand comparison web sites. You will discover many other so called on-line comparison websites that are nothing of the sort. They are set up just to get hold of your contact details and sell them on to the highest bidder. So beware of any that want your telephone number before giving you at least an indicative quote, your phone could be ringing off the hook within minutes. I found these people to be very persistent and, personally, as I dislike the hard sell, I think they are best avoided.
5. Look for specialist providers. They have the best reputation for offering good value. The problem is that many you will not have heard of. That is why it is useful to check out the comparison websites that will help immensely to narrow down the search. However, not all suppliers are on them. Money Saving Expert recommendations for Mortgage Payment Protection Insurance are another useful route to finding the best value providers.
6. The lowest premiums are generally offered by providers who are far more selective in terms of the people they will cover. However, if you do meet their criteria the premium charged can easily be less than half or even just a third of what you might be charged elsewhere! Also, please bear in mind that unlike motor insurance, the older you are, the more expensive this cover becomes.
7. If you have been made redundant in the last year (even if you got another job straight away), have been in a job for less than 6 months, or your company is already making cut backs, most providers will not cover you. Only the most expensive might be prepared to offer you insurance, however some of their terms and conditions may further restrict their cover. Some of the lowest premiums are only available to people not deemed to be in ‘at risk’ industry sectors. For example, builders and civil servants will struggle to find a good deal at present.
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8. Most do not offer instant cover, even if you apply on line and fill in a direct debit there and then. Many will only accept your application initially and will then confirm if they will offer cover after making checks. Usually these checks focus upon your employer with special reference to any planned lay offs. For applicants with medical problems they may ask for a doctor’s report where cover includes accident and sickness
9. You can also buy this type of insurance via an IFA or your local mortgage broker. However they usually cannot offer a choice of provider and as they give advice and handle the paperwork for you, the premium will be substantially higher. Nevertheless, if you hit problems applying on line or your application is rejected by web providers, brokers do represent a useful alternative. Unfortunately once you get in front of any intermediary be prepared for a comprehensive selling job, they have a raft of other insurances they would love to sell you. So be very specific, or they could keep you there for hours!
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