Critical illness and life cover. Too expensive?

marcyj_2

My fiancee and I are due to buy our first home together at the end of March. We have sold our flat and are on our way at long last. The IFS recommended a BUPA critical illness and life policy. It comes out at £130 per month for the both of us. It's a little bit higher because my fiancee hasn't given up smoking for the required 12 months.

We live in the Channel Islands where only 4 companies are allowed to operate so they have a bit of a monopoly. It just seems a lot of money to spend. Over the 30 year life of our mortgage that come out at over £46k spent with no return. Are there policies out there where you get something back?

dunstonh

It just seems a lot of money to spend.

So is paying off the mortgage if you lose an income or die.

Are there policies out there where you get something back?

You mean endowment policies? If they were used then the premium would be around £800pm for the same level of benefit. If you want money back then use an investment product. Trying to fudge it into a life policy is not tax efficient and you get poor options. This is why there is only one mainstream [regular premium] endowment provider around today and they only do it as a tax wrapper and not for any other reason.

ACG

There are alternatives...

Lowed the sum assured, lower the sum assured just on the CIC side of things?
how long does your husband have to wait until it has been 12 months? You could look to re-do the policy in a few months time which should lower the premium then.

Having SOME cover is better than having none, but think about if one of you were to pass away how would you cope... could you cope?

bouncydog1

Do you have any cover under your employment e.g. death in service 4 times salary which might help a bit.

marcyj_2

We both work in the civil service in the channel Islands. We have 6 months full, 6 months half pay for short term illnesses, a defined pension and benefits on death. A really good deal.

magpie49

I have no idea what's "expensive" for critical illness cover and would appreciate some feedback on a quote I've had from a financial advisor.
Female, non-smoker and in excellent health, age 50. £100K CI cover with £50k life cover with BUPA - £125 premium per month. Sounds pricey to me. I have no dependents.

kingstreet

magpie49 wrote: »

I have no idea what's "expensive" for critical illness cover and would appreciate some feedback on a quote I've had from a financial advisor.
Female, non-smoker and in excellent health, age 50. £100K CI cover with £50k life cover with BUPA - £125 premium per month. Sounds pricey to me. I have no dependents.

Why have you chosen life cover? No dependents, who's the money to go to?

Did you want life cover as well as critical illness cover? This could pay out £100,000 if you get a critical illness, then another £50,000 if you die.

Level or decreasing? How long for? Guaranteed or renewable rates? Decreasing cover is cheaper, if for example it's covering a repayment mortgage. The longer the term, the more expensive it will be. Guaranteed rates stay the same for the whole term. Reviewable rates could change if the claims experience is worse than expected, increasing your premiums.

kingstreet

Example;-

Level term life cover £50,000 for 15 years guaranteed rates - £10pm

plus

Level critical illness £100,000 for 15 years guaranteed rates - £89pm.

This would pay out on critical illness, then on death, during the fifteen year term.

or

Level death or earlier critical illness cover £100,000 over 15 years guaranteed rates - £89pm.

This would pay out on death or on a critical illness, whichever came sooner during the fifteen year term.

or

Decreasing death or earlier critical illness cover £100,000 over 15 years guaranteed rates - £55pm.

This would pay out a reducing sum on death or on a critical illness, whichever came sooner during the fifteen year term.

As you can see, the options cause the premiums to vary widely. Please come back with the answers to the queries in my last post.

magpie49

The adviser said that life cover isn't "much extra" as £100K CI on its own was £112 pm.
Great questions, now that you've pointed them out and none of which my advisor has fully explained to me. It is based on a Level term, 16 years and a guaranteed rate. Sadly, it wouldn't cover my mortgage if I was too ill to work as that currently stands at £135K.

I guess the money will go to my partner and family to pay off the mortgage and have a good party!

kingstreet

The first question you should ask yourself, is how do I pay my bills and my mortgage if I can't work. You can be off work but not be able to claim on critical illness cover.

Then, you'd like the mortgage repaid if you die, or if you get a critical illness? Why is level cover more appropriate than decreasing if you have a repayment mortgage where the balance falls?

What is your occupation? How long would your employer pay you if you're off work sick?

magpie49

I am the director of a small limited company (3 employees) so there is no pay from my employer other than salary which would eventually run out if I'm not bringing in any income.
I'm not bothered about repaying the (repayment) mortgage when I die as there are no dependents. My partner has his own house and would rather sell mine, pay off the mortgage and the proceeds would be part of my estate.

I guess my concern is if an illness prevents me from working and earning enough to pay the mortgage & bills (£2500 a month) then what cover do I need? I can survive for 12 months without an income but it's the usual thing.....what happens in the long term?

Your comments and questions are confirming what I felt - I don't fully understand what I'm being asked to sign up to and I think the advisor hasn't done enough to help me make the right decision.