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Income and Critical Illness Insurance Advice Needed
Amatheya81
Posts: 530 Forumite
Hi,
I'm a bit dim when it comes to insurance so I though I'd ask you lovely people for a little advice.
2 years ago I bought a flat and had to take out Critical Illness and Income Insurance. I'm paying about for the critical illness £17 and £13 for the Income insurance.
I'm wondering, I've heard that critical illness insurance can be a bit dodgy and isn't nessesarily worth it and it's a lottery over whether it would pay out if I got seriously ill or not so I was wondering is it actualy worth having both? I have no dependants or spouce and I'm under 30 so there isn't actually anyone who would go without if I was ill accept me.
Hope you can help shed some light on the matter.
I'm a bit dim when it comes to insurance so I though I'd ask you lovely people for a little advice.
2 years ago I bought a flat and had to take out Critical Illness and Income Insurance. I'm paying about for the critical illness £17 and £13 for the Income insurance.
I'm wondering, I've heard that critical illness insurance can be a bit dodgy and isn't nessesarily worth it and it's a lottery over whether it would pay out if I got seriously ill or not so I was wondering is it actualy worth having both? I have no dependants or spouce and I'm under 30 so there isn't actually anyone who would go without if I was ill accept me.
Hope you can help shed some light on the matter.
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Comments
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I've heard that critical illness insurance can be a bit dodgy and isn't nessesarily worth it and it's a lottery over whether it would pay out if I got seriously ill or not so I was wondering is it actualy worth having both?
Claims stats show that around 85% of claims on CI policies are paid out. The ones that are not paid out are due to non-disclosure of facts and not being covered. Sure there will be the odd case that doesnt go as it should do and these are the ones that usually end up making the bad press but they are tiny minority. Yet look at the damage they do.
Statistically, you around a 1 in 6 chance of suffering a claimable event on CI before retirement. Its your choice if you decide to play the odds or not.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Well the lottery bit does have some basis in fact.
CI only covers SOME illnesses.
So you could get ill and not be covered.
I don't know what your income protection covers - is it for sickness? accidents? redundancy?
Permanent Health Insurance covers you for an income until retirement if you can't work through ill health. It does not matter what the illness is, what matters is that you are unable to work and it will pay out until you get a pension.
Critical illnesses cover certain illnesses, which might coincide with not being able to work, but might not. Other illnesses are not covered. It pays a lump sum. This could be very useful for paying a mortgage, getting private treatment, paying for care, or going on a holiday ofa lifetime before you die, but won't necessarily cover an income for life if you are young.
Ideally you'd have both, but it can be difficult to afford everything.
Personally I prefer the PHI cover as it pays if unable to work.
But different things may be appropriate for different cirumstances.
Both policies sound quite cheap, so I'm wondering if you have "budget" cover.0 -
You have to ask yourself if i was ill say with cancer and couldn't work how would i pay for the things i want? If you can pay for them without the critical illness cover then maybe you don't need it.
You also need to weigh up the costs i.e. is it affordable? If its making you go into further into uncomfortable debt then it you may decide its not worth it at this momemt. I agree with lisyloo what your paying sounds cheap, but i'm guessing 81 is your birth year which makes you a 'young un' and therefore cheaper premiums. If you were to cancel it now and take it out again in the future it will probably be more expensive as they tend to be age rated i.e. the older you are the more it costs in this instance.
Remember you are at least 5 times more likely to claim on a critical illness policy than life insurance.I am a independent health insurance specialising insurance broker. Anything posted on here should not be considered advice and is for discussion purposes only.0 -
You have to ask yourself if i was ill say with cancer and couldn't work how would i pay for the things i want?
You might be covered on the income protection here, so there is SOME overlap, although that does not mean that CI is useless.Remember you are at least 5 times more likely to claim on a critical illness policy than life insurance.
This is true, but there are also other factors to consider.
For example if you are ill you may have options.
You might for example be able to sell you home and move back in with your mum.
If you are dead, there are no options open to you.
So you need to consider the CONSEQUENCES of what happens if you are ill/dead etc.
BTW - I suspect you probably didn't have to take out the income and CI cover. These are not usually mandatory.
Although your sales person/advisor may have cleverly crafted their words to make you believe they were mandatory.
For exmaple they could have said. "You need to take this cover if you want the mortgage", hoping that you would believ it's madatory when they were in fact just expressing an opinion on what you need.
It is unusual for anything except buildings cover to be mandatory and that's because the building is the lenders security.0 -
BTW - I suspect you probably didn't have to take out the income and CI cover. These are not usually mandatory.
Although your sales person/advisor may have cleverly crafted their words to make you believe they were mandatory.
For exmaple they could have said. "You need to take this cover if you want the mortgage", hoping that you would believ it's madatory when they were in fact just expressing an opinion on what you need.
It is unusual for anything except buildings cover to be mandatory and that's because the building is the lenders security.
Spot on.
Lenders have not made anything other than building insurance compulsory on mortgages for many years.
I can never see the point of an adviser strong arming people into taking cover.... but I know it goes on.
I'll always recommend protection as par for the cause, but if someone takes out a policy under protest, and ends up cancelling it in a few months time, I'll have to pay all the commission back to the insurance company .... so there really is not any pointI am a Mortgage adviserYou should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Dunstonh facts are correct.
The pay out rate for critical illness cover is around 85%.
Income protection rates are very high at 90% and above.
And no!! THEY DO NOT OVERLAP! They do not do the same thing!!!Motto: 'If you don't ask, you don't get!!'
Remember to say thank you to people who help you out!
Also, thank you to people who help me out.0 -
Right, I think I'm going to go off and have a long read of my paperwork. TBH The mortgage advisor told me I had to have one of the (can't remember which) in order to be acceoted for the mortgage. And advised that I had better have both. I'm thinking about this now because my income is barely covering my outgoings and we're just talking about food and bills forget about anything else so I need to find areas to cut back. This is more of a do I need it thin rather than a is it worth anything question. I'd like to have every assurance that I'm covered but in the end if it's a choice between eating and paying for a nice to have it's going to be eating.
Unfortunately I'm feel if anything more confused0 -
And no!! THEY DO NOT OVERLAP! They do not do the same thing!!!
Can I clarify that please.
For Clarity I did not say they overlap completely.
But let's say you got a critical illness and couldn't work.
Would you get paid a lump sum AND an income.
You see I would call that "overlap" and think that's paying twice.
Of course it would benice to have 2 lots of dosh, but then it comes down to whether you can afford to pay the premiums for that luxury.
Please calrify.
For clarity I'm not saying they always overlap, but there is some overlap.0 -
so I need to find areas to cut back
Lots of people stick their head in the sand and don't face up to their problems and get into debt. This is usually a vicious circle because interest makes it worse.
I wouod advise you to make a list of everything you spend on a monthly basis
e.g. mortgage, food, gas, electric, water, car, home ins etc.
Have you done this already?
The reason I say this is that these insurance bills are quite small, so it would make sense to tackle the biggest areas first where you can make the biggest savings.
What mortgage deal are you on? who with?
Do you have any idea of your LTV? (loan to value %)
You may be in the siutation where you can't switch deals because you don't have enough equty after recent prices fall but it's worth asking the question.
On the insurance front (and I stress this is JUST my opinion) I would keep the income protection and not the CI.
It's not that I think that CI is a waste of money, but you clearly can't afford it all and the income protection will pay out if you CAN'T WORK.
The critical illness whilst it has other uses, it won't necessarily pay out if you can't work because you might get an illness that isn't covered.
But I also think you need to take a step back and also look at some of your other bills before you do anything.
For exmaple have you already checkout out mortgage, car insurance, home insurance, phone, gas, electric etc.
I would look at everything before making a final decision.0
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