12/03/2010
Many people celebrating Mothering Sunday this weekend will no doubt conclude our mothers are priceless and we couldn’t do without them even for a day. But most insurers offering homemaker’s cover under income protection plans would not pay out for four weeks leaving a potentially, large financial gap for stay at home mums.
Ben Heffer, Insight Analyst at Defaqto commented: “Many families have no strategy for coping if the homemaker were long term sick or disabled and could no longer run the home and care for the children. This is surprising considering the repercussions of them not being able to perform this role are as wide as for the traditional ‘breadwinner’ of the family. Often this is because of the perception that no “income” as such is associated with this role where it could equate to £18,500 or more1. Putting the right plans in place could mean financial support of up to £250,0002 per year.
Mr Heffer continued: “In the event of being unable to do your job as a result of an accident or long term sickness, an income protection policy pays a monthly benefit equivalent to a proportion of your income. 27 insurers offer these polices to cover ‘housepersons’ too and pay out if basic activities of daily living cannot be performed”.
Stay at home mums should consider the following which will impact the cost of cover:
1. The amount of benefit chosen
For housepersons and those not in employment, the benefit is often limited to a lower amount. The benefit amount chosen will be paid less any other insurance benefits the person has. The maximum benefit varies widely ranging from a basic £1,500 up to £250,000 per annum. The most common amount is £12,000 a year.
2. The waiting period
This is the period of time before the benefit starts to be paid after a claim, typically four, eight, 13, 26 or 52 weeks. Holloway style plans from friendly societies can offer cover from day one.
In view of the fact that houseperson’s benefit is paid out only in cases of severe disability it would not be unreasonable for insurers to consider offering shorter waiting periods for houseperson’s cover particularly given that in view of current economic environment many families would struggle if the homemaker were unable to care for the children and run the house.
| 1Role | Average salary | Time | Notional Salary |
| Housekeeper | £16,384 | 40% | £6,554 |
| Cook | £14,784 | 10% | £1,478 |
| Child care worker | £19,400 | 40% | £7,760 |
| Chauffeur | £26,748 | 10% | £2,675 |
| Total | £18,467 |
2Table of maximum benefits
| Provider | Max benefit | Waiting period |
Defaqto Star Rating |
| AEGON Scottish Equitable | £15,000 | 13/26/52 weeks | 5 |
| Alliance & Leicester | £9,600 | 13/26/52 weeks | 3 |
| Aviva Income Protection Solutions | £15,000 | 13 weeks | 5 |
| Aviva Safeguard | £12,000 | 4/8/13/26/52/56/ 104/122 wks |
3 |
| Axa | £15,000 | 26/52/104 weeks | 5 |
| Bright Grey | £16,800 | 4/13/26/52 weeks | 3 |
| Bupa | £15,600 | 13 weeks | 5 |
| Cirencester Friendly Society | £2,730 | 1d/1/4/8/13/ 26/52 |
3 |
| Dentists' Provident | £1,500 | na | 3 |
| DG Mutual | £5,200 | Day 1 | 1 |
| Fortis Life | £20,000 | 4/8/13/26/52 weeks | 5 |
| Friends Provident | £15,600 | 4/13/26/52 weeks | 4 |
| Legal & General | £20,000 | 4/13/26/52 weeks | 5 |
| LV= | £18,000 | 3/6/12/24 months | 4 |
| Nationwide Building Society | £12,000 | 13 weeks | 4 |
| NatWest Life | £12,000 | 13 weeks | 4 |
| NFU Mutual Essential Abilities | £20,000 | 4/8/13/26/52 weeks | 2 |
| NFU Mutual Personal Income Protection | £175,000 | 4/8/13/26/52 weeks | 3 |
| Pioneer Friendly Society | £10,400 | Day 1 or 4/8/13/26/52 wks | 4 |
| Progress from Royal Liver | £20,000 | 13/26/52 weeks | 4 |
| PruProtect | £18,000 | 4/13/26/52 weeks | 5 |
| Royal Bank of Scotland | £12,000 | 13 weeks | 5 |
| Scottish Provident | £12,000 | 4/13/26/52 weeks | 4 |
| Shepherds Friendly Society | £4,800 | Day 1 | 3 |
| Sun Life Financial of Canada | £9,000 | 26 weeks | 3 |
| The Co-operative Insurance | £175,000 | 4/8/13/26/52 weeks | 3 |
| Unum Essential Ability Cover | £25,000 | 4/8/13/26/52 weeks | 3 |
| Unum Personal Inc Replacement Plan | £250,000 | 4/8/13/26/52 weeks | 5 |
| Wesleyan Medical Sickness | £14,400 | 4/6/9/17/22/26 weeks | 2 |
| West Bromwich Building Society | £15,000 | 26 weeks | nr |
-Ends-
Notes to editors:
Ben Heffer is Insight Analyst for Life and Protection
Ben graduated from Leeds University in 1984 and, after a spell in the civil service, entered the financial services industry working first for Bradford & Bingley Building Society and then at Countrywide Independent Advisers as a pensions researcher. In April 1994, Ben helped to establish the new company and the launch of the very first release of Aequos. Initially a pension specialist, in the course of his career with Defaqto, Ben has at various times been involved with annuities, investments, statistics, general database management and, latterly, the Defaqto Service Project. He now works in the Insight team with special responsibility for the life and protection brief.
For further information please contact:
Ben Heffer
01844 295447
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