Critical Illness cover v. Income Protection

MimiJane

Apologies if this has already been discussed ... can't find it anywhere at the moment.

My partner is shortly to become self-employed and is wondering which of the above policies is best to go for should he become ill and be unable to work. I appreciate there's all sorts of criteria to take into account here, but he's basically interested in being insured should be become ill long-term; short-term we'd be able to manage.

After looking at various life assurance policies, we're aware that they can be heavily loaded should you also opt for critical illness cover. Would it perhaps be more cost effective to opt for income protection? What is the difference?

Any advice would be appreciated.

payless

CiC pays a lump sum ( or poss regular payment) based on having a valid claim for listed major illness ( some might call it a windfall payout)

Income protection pays an income, should you be unable to work
( depending on actual policy might be based on own or any job or even daily activites. Cover against own occupation is considered better)
OK ends when you can go back to work - so only covers the actual need ( thats what insurance is all about)

policies aren't loaded for taking CiC - just the premium is higher for the greater risk.

In fact Income Protection (aka PHI) is as much if not more likely to have exclusion and health underwting loadings as CiC.

Obviously both would be ideal- but if on a budget I favour Income protection over CiC
( others may say take CiC for debt amount , then Income protection)

CiC is potentially an easier sale for the adviser , as contracts are easier to compare - but make sure its your priorities that are covered.

A good IFA or (whole of market) insurance intermediary ( ie not a tied agent, bank or small panel) should be able to help - check out their terms of business (ifa) or IDD/ Key Facts (insurance intermediary)

and check they are FSA regulated http://www.fsa.gov.uk/register/

MimiJane

Cheers Payless ... good advice as always. I'll do some research on income protection.

SRD

If self employed take care to look at the details when taking out income protection. Self employed people usually take a large part of their income as dividend - only some insurers will consider. One of them is Friends Provident. I have just taken out a policy with them at £33.74 per month for £759 of cover. After taking advice and finding the best cover (Friends Prov) i basically shopped around the net haggling to get the best quote - evetually used lifecoverquote.com. It all comes down to how much they are willing to cut their commission.

I would also agree that income protection should be taken before criticall illness.

payless

SRD wrote:

If self employed take care to look at the details when taking out income protection. Self employed people usually take a large part of their income as dividend - only some insurers will consider. One of them is Friends Provident. I have just taken out a policy with them at £33.74 per month for £759 of cover. After taking advice and finding the best cover (Friends Prov) i basically shopped around the net haggling to get the best quote - evetually used lifecoverquote.com. It all comes down to how much they are willing to cut their commission.

I would also agree that income protection should be taken before criticall illness.

whilst in general you seem to be agreeing with me- just a couple of points-

self employed generally means working for an unincorpoated firm ( ie sole trader / partnership) and hence no dividends.

Its when working for your own Ltd limited campany that you may find larghe % of "income" is dividends.

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Taking "advice" and then shopping around-
is the final adviser taking responsibility for the suitability of the product / recommebdation of provider?
What if the original "advice" was bad - you may find yourself with no recourse if then shopped around and purchased "execution only"