PHI or CI

louisec

Can anyone explain the pros and cons of PHI versus CI? I've been talking to an advisor today and am now really confused. I am starting to think that PHI is better than CI as even though it doesnt pay a lump sum, it will pay out if I cannot work due to illness/incapacity even if I dont have a 'specified' CI. I am thinking I could use PHI to cover my mortgage payments rather than pay off my mortgage in one go if I have CI cover.

Confused.....

mark55man

Can't help, but would really like to know the answer. so I guess that's a bump!!

JayZed

PHI should generally be a higher priority than CI. Ideally it would be better to have both, but assuming you can only afford one premium, PHI is more useful cover to have - in a nutshell, there are far more circumstances where it will pay out - if, for example, you injure yourself badly and can no longer work, PHI will kick in.

CI is pretty tightly defined and will only pay out in quite specific circumstances. That's not to say it's not worth having - it's just that for most people it shouldn't be prioritised above PHI.

thejoose

JayZed wrote: »

PHI should generally be a higher priority than CI. Ideally it would be better to have both, but assuming you can only afford one premium, PHI is more useful cover to have - in a nutshell, there are far more circumstances where it will pay out - if, for example, you injure yourself badly and can no longer work, PHI will kick in.

CI is pretty tightly defined and will only pay out in quite specific circumstances. That's not to say it's not worth having - it's just that for most people it shouldn't be prioritised above PHI.

Whilst I can understand some of the logic here, I think it would also be pruden to consider that if you had a serious illness you may need more than just income to pay for any treatment that may be necessary.

A serious illness might result in much higher bills than a PHI policy could cover in the short term.

That said, as pointed out a PHI policy may cover you if you are signed off from work with stress or back pain for a period of time whereas a critical ilness policy will not.

In terms of priority I would often consider that CI cover comes first as I would protect myself against the most serious threat first and then if I could afford it I'd then protect myself against less serious financial sufferring ie income loss.

Hope that gives another perspective for you in making your decision. The right answer is indivual to you of course but can help to hear different view which is probably why you asked the question here.

I am an adviser but my contact details are not listed here so my comments are purely my opinion.

lisyloo

Just to sum up the main differences.

PHI pays out if you cannot work.
CI pays out if you get a specific illness which is on a pre-defined list.

PHI pays an income until retirement
CI pays a lump sum (If you have decades until retirement then CI won't cover it).

Personally I favour PHI .
CI is suitable for redesigning your house post diability or a final holiday, but not much use in providing an income for decades and of course you could be unable to work but not have an illness that's "on the list".

As always it comes down to what the requirements and circumstances are.