June is a big time of clarity, reassessment and focus for me. This includes everything in life from business strategy to body and mind health and my financial health. For this post I am focusing on my financial health.
Karma has a way of working to help you out if you do good things in your life. I met the team from Drewberry Insurance at the Headline Money Awards (an awards show for the financial PR and journalism world). They invited me to join them at their table for the evening’s dinner, drinks (and more drinks) and awards. I immediately loved what they stand for as an insurance company. They have similar values to me and genuinely want to help people to have the right insurance that isn’t going to cost them the earth. Customer service is incredibly important to them. I was impressed.
Drewberry offers all insurance products including Life, Critical Illness, Income Protection and Health Insurance. They are an independent broker who find you the customer the best deal based on your circumstances and arrange everything about the policy for you. They also have a financial planning side of the business where they can offer top quality financial planning guidance.
I soon realised after about five minutes of conversation that I was unprepared insurance wise. I had an ‘Oh @@@@’ moment. Firstly, I didn’t have enough life insurance cover to even cover my outstanding mortgage or a will in place. I’ll save those stories for other posts. Because also I did not have any income protection insurance.
What is Income Protection Insurance & Who Needs It?
When you work happily (or not so happily away) for someone else you have a teeny bit of security. As in you will have some notice pay and sick pay, hopefully, although not everyone does. As an employed person its worth just checking with HR what you would be due. Maybe its one-month notice pay if you were made redundant. Or maybe its one-month sick pay at full salary, two months as half salary. Do check your benefits.
Is this money enough to cover your essential bills and repayments if you had an illness that stopped you from working? If it’s a no then you need to think about Income Protection Insurance.
It is even worse for those of us self-employed, freelance, zero-hour contract people. If I am unable to work my income literally stops, if I cannot write I cannot earn, simples. What if you are a painter, and you break your leg? If you are a hairdresser, what happens if you are diagnosed with cancer? What happens if you have a mental breakdown and must take six months off work? Income protection Insurance is very important for self-employed people.
I now have Income Protection Insurance
The thought about getting this insurance was placed into my head by the wonderful Pete Matthew a while back. It was mentioned in his Meaningful Money Facebook Group and he also did a podcast about it. Until this point it had all been a mystery to me, but he explained it well and suggested that the best insurance for me would be income protection.
I remember a quote around 15 years ago from a scrupulous financial advisor. He told me income protection would cost £180 per month, given my age then of 27, it probably wasn’t too far off.
I put it off the investigation into the insurance for a few months, I am aware I am good at procrastinating at certain times of the year.
I relayed this experience to Tom Conner, director of Drewberry Insurance at the Headline Money awards, and he shook his head, “There is no way your policy would cost £180”, he said. “Let us do you a quote and we’ll see what we can do”. Lovely, I took him up on the offer.
The Quote Customer Journey
I spoke to Victoria Slade one of the independent protection experts on the phone for an initial information gathering exercise.
Firstly, we talked about what type of insurance was right for me. There are certain decisions you need to make to determine the level of cover. We began by going through my income and expenses. We based the cover on my last years average monthly income and went through my essential expenses and added them up. The value of proposed monthly cover was calculated at 75% of my expenses total. I can make cutbacks, this felt comfortable.
Next, we looked at how much emergency money I had and how long I could delay getting the money. Three months felt comfortable for me; I have a cash emergency fund in place. If it was one month the premium would roughly double for me.
We also looked at how long I would need the insurance to stay in place. I decided until 60 would be fine as I would be financially independent by then with pension contributions being paid out to me from my private pension at least. Definitely not state pension though which is aged 65 at the moment but due to rise to 67/68, who knows what the government may decide to do.
The premium would be guaranteed, and the benefit is indexed as well, meaning that it grows with inflation price rises.
We also covered medical history. Height, weight, lifestyle, any illnesses, operations and medical history of my family. A slight spanner in the works as mum and dad died of heart attacks ages 58 and 63. And my brother had a stroke aged 59, he survived. Serious illness and death before the age of 65 does impact insurance policies.
Victoria went off to do her research to find me the best policy
After a few days Victoria came back to me with a policy from an insurance company called The Exeter. My policy was immediately accepted despite the family history. This did however rule me out from a few policies where certain companies wouldn’t consider me for the insurance given the early deaths of my parents.
The policy is costing me £30ish per month. SO MUCH less than the £180 quote from 15 years ago!
I now have income protection insurance and feel secure. Security mainly for my boys that I can pay the bills even if the worst happened and I got ill and couldn’t work.
The policy went live 1st June, just 8 days after the initial discussions started. Drewberry will re-review every year to ensure everything is still relevant in terms of cover. In terms of time I do like to chat, we had three phone conversations and a few email exchanges. Maybe 90 minutes of my time.
Some Important points to pull out to keep your policy affordable
- Do not over-insure. Work out the total of your essential expenses only and cover just things like mortgage, food, utility bills, mobile phone, life, car, home insurance, essential expenses.
- Ensure you have an emergency fund set aside in a cash savings account. Marcus is a good cash online account; it pays 1.5% interest now which is pretty good for easy access.
- Set your month correctly for when you would want the payments to start. If the payments kick in after one month your policy will cost more. Three months is an ideal point.
- Set your expiration date correctly as in when you want the policy to end! Aged 60 was fine for me as I know I can draw on my private pension from 55, but prob wont start drawing until aged 60 and beyond.
Watch out for more content to come soon as I have also sorted out my life insurance with Drewberry and my will with Beyond Life. I am now in control of my financial destiny.
I have some big goals with my finances to reach financial freedom. Things like paying off my mortgage and building a fund of money which allows me to not have to work if I don’t want to at some point in the future. Drewberry are also going to help me with a financial planning session so I know what I need to put away each month and what to put that money in, be that pension or investments. So much content is coming. I am excited about this partnership.
This is a collaborative post with Drewberry Insurance.