illness insurance payout - what to do with it?

££sc££ · 29 November 2014 at 9:17PM

Hi
Hope I've got the right board.
we've received a large payout (£200k) from critical illness cover. The illness should not impact ability to work in future as chance of reoccurance is less than 1% according to oncologist. The intention was that this would clear our mortgage but as we are in a fixed we can't pay it off without financial penalty. Guess we could pay when fixed period up or would we get a better return from investing? current mortgage has 2 years left and is at rate 2.19%. We don't need the money for new house or cars. Just wondering what to do with it in meantime. currently sitting in current account getting 0% interest. i thought about ISAs but thought you could only pay £3k in each year per person. We are both employed and have two young children.
Any advice gratefully received.
Thanks

PeacefulWaters · 29 November 2014 at 10:39PM

Here's some thoughts, in no particular order (except for 1):

1. If you've had a rough time have a bloody good holiday!

2. Can you pay part of your mortgage off without penalty (e.g. 10% of the debt).

3. Home improvements that could save you money longer term e.g. new boiler or insulation.

4. Lump sum pension contributions.

5. £15k per adult per year into ISAs. Start at stocks and shares rather than cash.

6. Investment in junior ISA for each child to give them a start at 18.

7. Buy an education to further your earning potential in future.

8. High interest current accounts.

9. Charitable donation, with Gift Aid.

10. Have another bloody good holiday next year too!

11. Pay off any unsecured debt.

12. Do something you couldn't afford previously such as buy a family season ticket for your local football club etc.

££sc££ · 29 November 2014 at 10:59PM

Thank you PeacefulWaters. That's a great selection to get me started with a bit of research. Nice holiday is first stop, just waiting for the chemo to wear off and two children's passports to arrive !

kangoora · 29 November 2014 at 11:18PM

I would immediately split it between 3 current accounts in different banks. You do realise that you are only insured for up to £85k of deposits in each bank?

OK, relatively small chance of banks going bust, but better safe than sorry.

See this article for more details

http://www.moneysavingexpert.com/savings/safe-savings?_ga=1.157138163.99755547.1406241410

misswansea · 30 November 2014 at 1:26AM

First thought have you done the maths on the mortgage?
A couple of years ago an inheritance allowed us to pay off a chunk of our fixed rate mortgage. The penalty fee was eyewatering but still only about half what we would have paid in interest before reaching the end of the penalty period.

Second thought your policy was bought to secure the house for your family should the worst happen, it won't pay out twice and I would imagine you now have a medical history that would make new cover expensive. So you should consider investing it in such a way that it could be used to pay off the mortgage in the future just in case something else happens that does curtail your earning potential.

However Peacefulwaters ideas are all very good and a holiday is an excellent way to get a proper perspective before making important financial decisions (Inheritance also took us halfway round the world).

roseka · 30 November 2014 at 5:25PM

Hi. Same thing has just happened to me although I'm waiting to start chemo, hoping for similar positive outcome. Husband went and paid mortgage off while I was still in hospital last week as luckily there was no penalty and there seemed no point in delaying and paying pointless interest. There was absolutely no sense of celebration in paying off the mortgage whatsoever and we would willingly swap all that cash for this never to have happened. Still, the fact that there are less worries financially does make it a bit more bearable. The lump sum we have left is far less than yours at about 40k but still not to be sniffed at and we are considering how to invest it for the future (we have 2 teenage boys): stick it in cash isa's, use as a deposit for a buy to let property, or invest in stocks and shares. When the dust has settled we'll seek professional advice but any suggestions welcome. And we do have to consider taking out another life/illness policy for husband. And yes, a holiday will be definitely on the cards once all treatment over. I wish you all the best.

gadgetmind · 30 November 2014 at 7:08PM

We got a smaller but still significant sum when my wife had breast cancer.

We're in our 50s, so most immediate needs are taken care of. I therefore split the money between pension lump sums, NS&I linkers (not an option currently), and an equity income portfolio.

There really isn't an easy answer, but make sure that the bulk of it is invested for the future and only what you *really* need to spend now is spent.

illness insurance payout - what to do with it?

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