Income protection or critical illness for a housewife?

Chris_P_2

Hi, i am looking at protecting my household if my wife (who stays at home and looks after the kids) was to become ill and unable to do this.

Looking at the likes of aviva and legal & general they appear to say that for a payout of income protection then the person has to fail 3 "ADLs" as this is deemed to be permamanet disability. That is fine, but when looking at the critical illness cover, they also use a similar definition for a payout on disability (though the actual defintions seem to vary from income protection to critical illness-why?).

What I would like some help with is: if we take out income protection for her, then the time it would payout would most likely mean that she would be deemed to suffer a critical illness.

So would we be better off taking income protection to bring in money on a regular basis, and critical illness for a lump sum to help us adapt to life. Or should we just take out critical illness cover for a larger amount that could payout for adjustments to the house etc, but also use the lump sum to generate an income?

Which sounds best, and which would be most cost effective?

stephenni1971

Comparing Critical Illness cover and Income Protection is like comparing apples with oranges. They are two different policies designed to do two different things.

IP will provide a regular income if you are unable to work regardless of the condition you have as long as you meet the criteria for ADLs - taken over a term ( most people until retirement ).

CIC will provide a lump sum if you contract one of the specified illnesses, and as you mentioned there is a Total Permanent Disability clause as well which would be assessed on ADL's as well. Bear in mind TPD claims make up roughly 2% of CIC claims, by far the biggest would be Cancer, Heart Attack, Stroke.

It would be easily possible to have an illness which qualified for a claim under CIC but not IP and vice versa, so its not as easy as which one should I have??

In an ideal world it would be a combination of both, with the emphasis more on IP then CIC.

Chris_P_2

stephenni1971 wrote: »

It would be easily possible to have an illness which qualified for a claim under CIC but not IP and vice versa, so its not as easy as which one should I have??

True, but not in the situation I am looking at: as a housewife will only get a PI payout based on ADLs, they will therefore be eligible for a CIC payout.

Forget Cancer etc - i know the need for CIC in that place but am thinking about income protetcion.

But specifically thinking about PI for a housewife: would it be better to take out PI, or CIC for a lump sum used to supplement lost income? As either way, the payoout will happen at the same time.

thanks

stephenni1971

Chris_P wrote: »

True, but not in the situation I am looking at: as a housewife will only get a PI payout based on ADLs, they will therefore be eligible for a CIC payout.

Forget Cancer etc - i know the need for CIC in that place but am thinking about income protetcion.

But specifically thinking about PI for a housewife: would it be better to take out PI, or CIC for a lump sum used to supplement lost income? As either way, the payoout will happen at the same time.

thanks

I think I am missing something here.

You are making some very broad assumptions here, start with the basics.

What do you want cover for? ( In this case to protect yourself from the financial implications of your wife being unable to carry out her normal daily 'house'work. )

As you can have cover for CIC or IP which one do you feel most closely fits your needs ( or which combination ).

What is your budget ( for most people the eventual cover they take is based on this ).

Why no decide on a level of cover you feel is appropriate for each of CIC and IP, then get some quotes and see how this fits with your budget.

There really is no absolute right or wrong to this, a lot of it is purely subjective. The vast majority of my clients have to compromise on some element of their cover for one reason or another.

Chris_P_2

if the wife becomes incapacitated we want £1250 per month income.

Now, TAKE INTO ACCOUNT MY PREVIOUS MESSAGES ABOUT DEFINTION OF DISABILITY.

Unlike a working person where there is every chance you could claim on PI but not CIC, this is not the case with a housewife. So out of interest, do you think PI or CIC would be most suitable or cost effective??

stephenni1971

Chris_P wrote: »

if the wife becomes incapacitated we want £1250 per month income.

Thats towards the top end of cover limits for IP for a houseperson - you asked about using CIC claim to provide an equivalent income - on current interest figures that would be a massive CIC sum assured to produce 15k per annum.

Now, TAKE INTO ACCOUNT MY PREVIOUS MESSAGES ABOUT DEFINTION OF DISABILITY.

Don't shout - its just bloody rude.

Unlike a working person where there is every chance you could claim on PI but not CIC this is not the case with a housewife. So out of interest, do you think PI or CIC would be most suitable or cost effective??

If you want to know which one is more likely to pay out - no way to know. CIC will give you a clear list of roughly 35 or more illnesses which could qualify, and you also have the TPD side - remember though that CIC policy are looking at PERMANENT disability. The ADLs for IP are different as they will continually review eligibility for a claim during time they are paying out.

As I said before, a combination of both can provide a reasonable compromise, as there is a potential to claim from CIC, IP or both.