Life insurance and critical illness

titchyone78

Please forgive me if this question has been asked many times before, I have been left somewhat confused over what to do.

I am increasing my mortgage due to buying a partner out of the property, so looking to at the minefield that is life insurance.

The questions I have are;

It is just me and my young son in the house, god forbid anything happens to me I know he will receive a decent death in service payment from my employer.

So... Do I really need to cover the whole mortgage amount in case of death?

I was considering covering say half of it, to save on money, is this sensible???

Critical illness is more important to me as if I am left unable to work then I would obviously want the majority of the mortgage paid off so I wouldn't have to move.

Does anyone know the company with the best coverage of illnesses?

I have had a look on the comparison sites and I'm finding it difficult to know what premium/company to go for.

Thank you

kingstreet

Make sure you have an income first.

Income protection cover pays you a monthly income if you are unable to work. Critical illness cover only pays out if you get one of a list of conditions and upto a set "level" or severity.

How long would your employer continue to pay you if you were off work sick and how much would they pay?

Use the answer to determine how much benefit you need and when it should start - for example, when your employer payments stop.

Look into "permanent health insurance" as it is known and make sure you take it on "own occupation" so it pays out if you can't do your job. Some of the cheaper plans may only pay out if you can't do any job, or are unable to complete four out of six minor work activities.

ACG

If you were to die what would happen to your young son?
Would he be staying in the property? Presumably you would want whoever is looking after your son to receive some sort of payment to ensure he never went without?
So you might not need to even cover half your mortgage amount, however if you want him to have the house then you might need to look at covering the full mortgage.

Critical Illness is a little more difficult, you can go after what covers the most conditions but that might not mean it offers the best coverage. Some insurers offer whats known as ABI+ which means it covers the condition upto a specified level and then goes above and beyond - so there is more chance of it paying out on that paticular condition.
The other thing you may want to look at, is PHI or Income Protection which will pay out if your unable to work due to ill health (ie it doesnt just pay out for the 35 or so conditions covered on Critical illness policies). It pays out a monthly amount, not a lump sum.

It might be worth having a chat with a financial or mortgage advisor. They will be happy to discuss this in as much or as little detail as you need and help to narrow down what your priorities are and then do the research to find what they think is best for you.

titchyone78

My son would live with his father and the equity I have in the house would more than adequately provide for him (100k)
His father would not have any problem looking after him financially, with the death in service and money from the house, he would be fine.

The points you raise about covering my wage should I be unable to work are valid, and I hade not thought of that.

I had used a IFA before now, however they always seem to recommend the most expensive policy, which also seems to pay the best rate to them, I could of just be too cynical and suspicious.

ACG

I dont always recommend the cheapest, i recommend what i think is best as thats what im being paid for. If its too expensive then i can look at alternatives.
If you dont like what your broker is recommending tell them, you both have to be happy with it.