What is Reviewable Income Protection?

You ever see a TV show or movie where a desperate character takes a loan from a shady one but when they go to make a payment the interest is so high that all of a sudden there’s no hope of them ever paying it back?

And then it cuts to the next scene and there’s a large gangster dude standing on their doorstep threatening to break their legs.

Okay, so I may be exaggerating a bit here but that’s kind of what Reviewable Income Protection is like.

The insurer is the heavy on the doorstep threatening you with immense financial pain.

And you might think that’s a weird way for an actual insurance broker to start an article about insurance, but bear with me for a second.

Insurance is a complicated game between you and the insurer.

The insurer is hoping for the best because it can only “win” the game if you don’t die or get sick. Perversely, you only beat the house if you die or get sick and make a claim.

At the end of the day, insurance lets you transfer the financial risk of death or illness to the insurer for a monthly premium.

But don’t get me wrong, the insurers get paid very well to take on this risk. Insurance is for the greater good but there’s a few quid to be made too.

In America, the most shambolic place of all, the CEO of a popular healthcare insurer was reportedly paid $18.9 million.

Which is madness.

And sure, the bigwigs in the glass buildings in Ireland aren’t raking in millions as take-home pay but they’re definitely not shy of a few bob.

Putting private jets and enormous yachts aside, in the grand scheme of things, getting Income Protection is one of the most responsible and valuable things you can do.

Why Income Protection is so important

Income Protection is a type of insurance that pays you a replacement income of up to 75 percent of your salary if you can’t work due to illness/injury. If needs must, you can count on it until you retire.

That’s unbelievable security if something terrible happened to you and you couldn’t go back to work.

The state’s benefits are fairly fecking meagre: it caps out at €203 per week and is only guaranteed for 2 years

Lads, €203. Try living on that with any kind of quality of life for an extended amount of time.

Grim, yes?

And what happens after the two years??

Which brings us back around to insurance and how, yes sometimes it can be a bit of a rip-off (especially if you go into the process uninformed) but it can also be a magical cash machine that falls from the sky just when you need it most.

An example: Jim is 45 and in fairly good health. He’s just had another kid so has decided to tidy his financials up and get Income Protection.

Sound Dad.

Vince is hit by a car when crossing the road and suffers a bad break. Complications mean he won’t be able to go back to work for a solid year.

Ouch.

He’s hit with a massive hospital bill (but he had the sense to take out private health insurance)

And he finds out that his company doesn’t have any sick pay policy in place, so he’s facing living off state benefits.

Even bigger ouch.

Until his Income Protection kicks in to save the day.

Now, the part where it starts to get tricky is the type of Income Protection that you might be offered – which is where the question of, “do you trust Life Insurance companies?” really kicks in.

Well, do you, punk?

You probably said no. Good. Be cautious. Know what you’re getting yourself in for. If you’re in this camp, look into Fixed/Guaranteed Income Protection.

If you said ‘yes’ (my sweet, innocent summer child) then you’re gonna serve yourself and your money up on a platter to a nefarious insurer who will pitch you Reviewable Income Protection.

What’s the difference between Reviewable Income Protection and Guaranteed Income Protection?

The big problem with Reviewable Income Protection is that the price you pay is reviewed every five years. Now, the insurer can increase, reduce (yeah, right) or keep the premium the same, but guess which one is most likely.

Go on, guess.

With every five years that passes, the chances of getting sick get a bit higher. The unfortunate side-effect of being a human is that we spend our whole lives slowly expiring.

With Guaranteed Income Protection, your premium is fixed.

Now with that out of the way, let’s look at how it really differs.

The main difference between Reviewable and Guaranteed Income Protection is the price.

Here’s a quote for a 35-year-old male insuring €50,000 income per year:

You can see Reviewable Income Protection starts out less expensive to lure you in – but over time, it can creep up and up with the hope that eventually it’ll get too expensive and you’ll stop paying it. The insurer wins when you cancel your policy and they get to keep all the money you’d dished out over time.

It catches people out because Reviewable Income Protection starts out cheaper than Guaranteed.

When your policy is being reviewed, the insurer will look at:

• The number of claims made by clients on a reviewable plan.

So if a number of those people have made claims in the preceding 5 years, you can expect an increase.

Essentially, Reviewable policies are a safety net for the insurer.

Yep.

Now, there is an interesting statto.

In all the time since Friends First (now Aviva) introduced their Reviewable policies, they have never increased their premium

So you could get lucky.

You could end up paying less with all the same perks of Income Protection.

Or you could have an awful time of it.

It’s up to you, but we know what I’d do. (Go with Guaranteed/Fixed, if you can.)

So, who is Reviewable Income Protection suitable for?

Look, I’m not saying don’t go for Reviewable Income Protection. It could make a lot of sense for you, especially if you’re:

• Budget conscious: If you need Income Protection cover but just can’t afford the price of Guaranteed.
• Closer to retirement: The closer to retirement you are, the fewer reviews you will face so Reviewable cover may make sense for you, e.g. if you’re 35 and intend to work until you’re 70, you’ll face six reviews but if you’re 55 and you intend to work until 65, you’ll only face one.
• Gamblers: Fancy a flutter on the 310 at Kempton? Reviewable Income Protection from Aviva is for you. With your glass half full, they may never increase premiums and you’ll be the smart one who saves 20 percent on their premiums.

But remember, there is a chance of your horse falling at the first and Friends First may review your premium in 5 years.

And then again after that.

And maybe again after that.

So think about it. Whatever you choose, make sure you know what you’re getting yourself in for.

Income Protection is so important as it’s the only insurance that really benefits you while you’re still alive and need it most.

Over to you…

I’ve bashed the insurers a bit in this article, but here’s a doozy for you: 97ish percent of all life insurance claims are paid every year.

So they’re not all bad guys is what I’m saying. They pay all valid claims just make sure you know what you’re paying for.

Look into your options. Make the best decision for you. Talk to an expert like me and get the peace of mind that Income Protection offers you and your family. You can get me on phone on 05793 20836 or contact me through the form below.

Alternatively, complete this short income protection questionnaire and I can send some quotes.

Knowledge is power…and money, so go for it!