Critical illness insurance - is it worth the money?

_Andy_

My father never took out CI or life policy - he was 'perfectly healthy' - non-smoker, non-drinker, regular exercise, good diet etc.

A few years ago he got diagnosed with MND (Motor Neurone Disease) and was dead three years later having exhausted a fair chunk of his/wife's life savings on converting the house, wheelchairs, care etc.

There will always be times when insurance doesn't pay out but as I said above, the time to take insurance out IS when you're young/healthy.

JoolzS

I think that payment protection insurance would have paid out in the circumstances listed above - for a much cheaper monthly payment.

Julie

_Andy_

No it wouldn't - my father was still working up until his death - payment protection wouldn't, in any case, have covered the high cost of care and converting the house.

Wutang_2

JoolzS wrote: »

I think that payment protection insurance would have paid out in the circumstances listed above - for a much cheaper monthly payment.

Julie

...and the reason for that is????

(Have a think)

lisyloo

somewhatnew wrote: »

If you can afford to keep paying your debts and would be comfortable with any ensuing lifestyle changes if one of you fell critically ill then no cover needs to be taken. If you would sufffer financially then yes, you should have some cover.

Somewhatnew makes an important point.
You need to consider what would happen if the event happened and you didn't have insurance. If you can manage (albeit worse off) then my personal approach would be to take the risk short term and get your debts down (remember to review at some point).

If you find the lifestyle changes or income unacceptable then you need the insurance.
This is specific to YOUR circumstances so no-one can give you advice on that although a qualified advisor can talk you through it.

Let me give you an exmaple. I have a 5 bed house with mortgage.
If my husband died I could move to a smaller house without a mortgage.
This would be an acceptable liefstyle change and I could cope with the change and income. Therefore I don't need life ins (assuming I can manage the period whilst the house is up for sale e.g. savings).
If it was imperative that I carried on living in the same home and couldn't afford the mortgage then I'd need insurance.

You need to go through the same process for various scenarios e.g. death, long term sickness, accident or critical illness that requires care or adaptions to your home etc.

magpiecottage

There are, essentially, two types of long term health insurance. Critical Illness is the "sexy" one. If you suffer a specified medical condition it pays out. It might be a "bolt on" to another type of policy or have some kind of investment arrangement or simply be a "pay the premiums and if it happens during the agreed term the policy will pay out £££££".

The £££££ is attractive but what if you get an illness which it doesn't cover and can't work? You still need to pay the mortgage and buy food. Permanent Health Insurance (not to be confused with Accident and Sickness or Payment Protection Insurance) runs for many years (that is why it is called "Permanent"). If you can't work it will pay out an income until either you are well enough to work again - or until the policy term ends if later.

It is generally harder for advisers to persuade their clients to take Permanent Health Insurance than Critical Illness because it doesn't have the prospect of a lump sum but if, say, a 25 year old had a policy paying £1,000 a month until he was 65, that could come to £480,000.

When I do compliance checks, I do not normally get too worked up about recommending Critical Illness in preference to Permanent Health Insurance.

But I would find it easier to defend a complaint that money spent on PHI would have resulted in a big lump sum if it had been spent on CI than that a complainant was losing their home because they had an illness not covered by their CI policy.

lisyloo

I agree with you magpie cottage.
I want to insure my income not insure getting an illness.
The whole point (to me) is to insure for the financial consequences of illness i.e. not working as opposed to just getting the illness itself.
For this reason PHI has always made a lot more sense to me.

CI could be useful if your house needed alterations but in view of the payment/cover trade-off (i.e. we can't afford everything) then I tend to think that's at the luxury end of the spectrum rather than the necessity end.