Covering your back with a new mortgage - critical illness?

jubilee12

We're going to take out life insurance for our new (first) mortgage. Talking to our IFA, critical illness seemed a good idea (we got the whole 'more people need critical illness than life cover' spiel). However 1) it's expensive and 2) checking on here and other places, I gather it may not be all it's cracked up to be - insurers can refuse to pay out if you don't get one of 'their' illnesses, etc. So we're thinking perhaps income protection would be better.
The final decision has to be ours, obviously, but it would be interesting to see what other people do?

kingstreet

Income protection will pay the premiums for the critical illness as well as your other bills, when you're too ill to work, but aren't ill enough to make a valid critical illness claim.

Try to avoid the short-term type bundled with unemployment cover and opt for old-style permanent health insurance, with the deferred period tailored to the time your employers pay you.

Always choose the "own occupation" definition of disability so the insurer pays out if you can't do your own job, rather than one which might be possible.

Take the term upto retirement if you can afford it, so you don't have to worry about the benefit stopping when the mortgage is repaid.

ACG

Im a big fan of income protection.

You say its expensive, thats fine... have you discussed a budget with your broker? The last thing your broker wants is for the policy to come off in 6 months time because you cant afford it.
Discuss it with them, let them come up with some alternatives that you think would be best for you.

One thing i do sometimes is to do income protection and then a smaller lump sum of critical illness on top - that way if the clients do get one of those illnesses they have a lump sum to pay for carers for a while or to make changes to the home. OK its not enough to clear the mortgage but there has to be a balance between cover and affordability.

droiderm

Just to add a balance to the discussion, of course mortgage brokers are going to be for it (Did i just say that?). That's not meant in a bad way.

I was listening to five live the other day, Martin was on talking about life insurance. There was some poor woman left with 2 children when her husband died. They had life insurance for 4 years but they wouldn't pay out because her husband hadn't declared some pins and needles he had been seeing his doctor about. Even though this was COMPLETELY UNRELATED to the reason he died.

I believe the law is changing next year, where there is less emphasis on the applicant to delcare everything. I don't know the details, I am sure someone more in the know can elaborate. I got the impression it's best to declare EVERYTHING you possibly know you have ever had issues with. Ridiculous I know. Maybe your broker will make sure you do that properly, but I seem to remember this lady went through some kind of adviser.

There is nothing more awful having that peace of mind your covered and something like this happens.

Link to the story

http://www.dailymail.co.uk/health/article-2247055/Family-cancer-victim-refused-life-insurance-payout-didnt-disclose-PINS-AND-NEEDLES.html

ACG

There is a post about that in the life insurance area.
It doesnt matter if its related or not, its serious enough for it to be a question on the application form and it was answered as no.
https://forums.moneysavingexpert.com/discussion/4349775

To be honest though, without knowing the full ins and outs its impossible to make an opinion one way or the other. Friends Life do have a good reputation. They're not sharks that decline payouts for the sake of it.

droiderm

Either way, in my humble opinion, it's a bit of a nightmare.
I couldn't honestly remember every time I have been to see the GP and why. Not sure everyone else could.

I thought I would just point it out to the OP, just in case.

dunstonh

However 1) it's expensive

The policies that are more likely to pay out are more expensive.

2) checking on here and other places, I gather it may not be all it's cracked up to be - insurers can refuse to pay out if you don't get one of 'their' illnesses, etc.

CI pays out in over 90% of claims.

I was listening to five live the other day, Martin was on talking about life insurance. There was some poor woman left with 2 children when her husband died. They had life insurance for 4 years but they wouldn't pay out because her husband hadn't declared some pins and needles he had been seeing his doctor about. Even though this was COMPLETELY UNRELATED to the reason he died.

I'm afraid there is more to that story than that. The person failed to disclose recent tests on his organs (so a fairly serious omission) and a recommendation to reduce alcohol intake (not something you forget). The provider said that had these been disclosed from the start they would not have accepted cover in the first place. Hence they are not paying out. Its not that he had an unrelated illness. It is the fact he wouldnt have had the cover in the first place had he been truthful with significant medical information of the sort you do not forget.

The FOS have non-disclosure rules and they are very fair and biased towards the consumer. Innocent non-disclosure of minor things is rarely an issue. Intentional non-disclosure is an issue. Inadvertent non-disclosure where it changes the position is an issue.

Also, you have to consider the application. It asks you about medical issues over the last 3-5 years. That is not a long period to remember visits to the GP. It then asks you specific questions about major issues. Major issues are not things you forget about.

At this time, the FOS hasnt ruled on this case. So, we are only seeing one side of the story with limited feedback from the other. We also dont have access to the docs whereas the FOS will.

I couldn't honestly remember every time I have been to see the GP and why. Not sure everyone else could.

Are you really saying you couldnt remember your medical issues for the last 3-5 years?

kingstreet

droiderm wrote: »

Just to add a balance to the discussion, of course mortgage brokers are going to be for it

I think I was pretty clear on preferring income protection cover, not critical illness cover. My viewpoint is as objective as possible.

However, as I said in the other thread, if the applicant had disclosed his other conditions, such as the liver function and advice to reduce alcohol consumption, the insurer would not have offered terms.

The pins and needles is a red-herring. It's being seized on as a reason to castigate the insurance company and the substantive issue ignored, because it appears trivial and a good by-line for the press.

Ultimately, if the FOS believes there was inadvertent non-disclosure, the insurer will be instructed to settle the claim, possibly with premium loading being deducted from the claim amount.

Back on topic - I believe income protection is more important than a lottery where you may hope you have a more serious condition because you could make a valid insurance claim.

droiderm

dunstonh wrote: »

CI pays out in over 90% of claims.

That means 1 in ten people don't get a pay out.
Isn't that scary? 1 in ten people reading this won't get a payout.

dunstonh wrote: »

I'm afraid there is more to that story than that...

I didn't know that level of detail.

dunstonh wrote: »

Also, you have to consider the application. It asks you about medical issues over the last 3-5 years. That is not a long period to remember visits to the GP. It then asks you specific questions about major issues. Major issues are not things you forget about

I honestly couldn't remember the last time I went to the GP, and why. I would imagine a doctor saying to lots of people everyday, you need to lose half a stone, or do more exercise, or cut down on the booze a bit. I am in most of these cases, the patient won't consider it a major issue.

dunstonh wrote: »

Are you really saying you couldnt remember your medical issues for the last 3-5 years?

As above yes. I don't have any major medical issues. I get the feeling all minor issues have to be declared, and that's what I don't remember.

droiderm

kingstreet wrote: »

I think I was pretty clear on preferring income protection cover, not critical illness cover. My viewpoint is as objective as possible.

However, as I said in the other thread, if the applicant had disclosed his other conditions, such as the liver function and advice to reduce alcohol consumption, the insurer would not have offered terms.

The pins and needles is a red-herring. It's being seized on as a reason to castigate the insurance company and the substantive issue ignored, because it appears trivial and a good by-line for the press.

Ultimately, if the FOS believes there was inadvertent non-disclosure, the insurer will be instructed to settle the claim, possibly with premium loading being deducted from the claim amount.

Back on topic - I believe income protection is more important than a lottery where you may hope you have a more serious condition because you could make a valid insurance claim.

I was just making the point that most people on here get commission for selling insurance products. I guess it's not the best place to get a balanced view.

koexelek

droiderm wrote: »

I was just making the point that most people on here get commission for selling insurance products. I guess it's not the best place to get a balanced view.

I don't think any of us would sell something we did not believe in.... just to earn commission:o