PHI or Mortgage Life Insurance with Critical Illness

matrix999

Hi Guys,

Question for the IFA's out there or anyone else who has experience.

I'm trying to organise some kind of protection for my mortgage which has approx £70,000 outstanding with 28 years left to run.

I'm employed full time and if I was to be off sick from my work my employer would pay 100% of my salary for 6 months and 50% for the next 6 months.

What I'm trying to establish is whether I should take out either a PHI/Income Protection policy or a straight forward Mortgage Life Insurance with Critical Illness policy.

I'm a little confused as to what would be the better option.

Thanks for any advice!

cooper2110

You need to be clear about the difference betwen the two.

Mortgage Life Assurance with Critical Illness cover will only pay a defined lump sum if you either die, or contract one of the chosen provider's list of critical illnesses. This will not pay you an income, say, if you broke your leg and couldn't work.

PHI will pay you an income after a deferred period for being out of work due to accident/illness.

There is an argument to provide both, but on the face of it, PHI with a deferred period of say 26/52 weeks would be best, up to the usual limits. However, this will depend if any income is provided after 52 weeks from your company via a disability pension if available.

opinions4u

You probably have a need for all covers, so it come down to affordability.

Speak to an IFA.

Have an open mind on the amount of cover for life and critical illness too. Don't just assume you are insuring your mortgage debt. Think about it as insuring your lifestyle. This may mean taking out a policy for more than the amount of your mortgage.

herbiesjp

Indeed taking both options would be ideal especially as the 12 month deferment period you could opt for on the PHI would keep premiums low

So if you were diagnosed with a critical illness and were not able to work, the CI cover would clear the mortgage debt, and the PHI would provide a replacement income to maintain your standard of living (without having a mortgage debt to pay each month)


As rightly stated above, affordability comes into it, and if it is a choice between the two you would need to look at which would be your priority - clearing your mortgage debt or maintaining a certain level of income.

dimbo61

Hi kevin
so many things to take into account such as !
Do you smoke,drink, work as a deep sea diver !
Have you got a stay at home wife and 4 kids to support !
What is your general health and what job you do ?
Go and see an IFA and consider if you need cover at all !
Save money into emergency fund ( 3/6 months income )
Overpay on mortgage and clear long before retirement.

Ian_Griffiths_Halifax

All insurances are a waste of money. Unless you have to make a claim, and then it's the best money you ever spent!

If you do take both policies remember that the Income Protection is a tax free income and would/should be in addition to any state disability/invalidity benefits as it isn't taken into account when means testing.

thejoose

I always look to explain to people that if diagnosed with a serious illness would you want income or a lump sum? Remember, if you had something critical then income from PHI may be less than you would like as you may have some pretty big expenses.

PHI is a great policy, however I would look at it after I've secured myself life and CI. I see it as covering the most serious things first.

Death--->Critical illness--->long term sick
Life--->CI--->PHI

Take as many policies as your budget will allow,