Critical illness and death or income protection

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anymore reviews please

opinions4u

- You could die.
- You could suffer a critical illness.
- You could have an accident or illness that stops you working.
- You could be made redundant.
- You could need an operation that means you can't work for weeks.

The list is no doubt longer.

The first thing you need to establish is which of these events will impact on lifestyle.

The second thing to do is to work out how much worse off you are prepared to be should any of the events stated occur.

The third thing to do is to work out how much you are prepared to pay to protect your lifestyle against the impact of such events.

When taking out a mortgage, you will typically be sold a life policy that pays off the amount in the case of death. But if you sit down and work out the real life assurance need for a couple with young children, it will be more than 3 or 4 times income. Similar for critical illness. And a redundancy policy that pays out the mortgage payment, which is perhaps only a quarter of income, may also be inadequate to protect your lifestyle - but is better than nothing at all.

If you lose your job through redundancy, you are worse off. But a couple with strong savings may feel that it's more cost effective to top up those savings each month with an amount equal to the premiums for a redundnany plan, rather than take out a plan which is paying commissions to a salesman and profits to an insurer.

The sums and decision making are not clear cut, and individual circumstances are different.

I have life cover, critical illness cover and a PHI plan (which I foolishly didn't index, so now only covers 20% of my income). I have never bought redundancy insurances as I have always felt that they are overpriced (and have seen old commission structures on them ).

It doesn't mean you should have the same.

A priority, ahead of all these insurances, is to ensure that you have a contingency fund of 3-6 months net inomce in an easy access savings to help you through a difficult time should it occur ... and build that fund back up again should you ever dip in to it.