Critical illness cover v pension contributions. Your thoughts please

Baking_Mad

Hi,

My OH and I have a decreasing term life and critical illness insurance policy which was originally set up in conjunction with the mortgage opened back in 2002. Part of the policy finishes in 5 years as it was tied to my husbands endowment, the other part has another 10 years left. The current approximate level of cover is 100k but this will obviously continue to reduce. Monthly payment for both is about £80

we no longer own a property and currently rent and will be for the foreseeable future. No major savings to rely on in case of critical illness.

My OH works full time, I'm currently at home with kids but starting to look for work as youngest is now over 2. OH presently has no pension provision, his work provide sick pay for up to 6 months and also in case of bad illness if unable to return to work his co will pay 75% of last p60 until retirement age (however I believe it's to co discretion)

For a while now I've been wondering if critical illness cover is a bit of nice luxury we've got without having a real backup in the form of pension to help us in retirement.

My thoughts were to cancel the policy, set up a new life only cover on level term (already costed this and can do 200k for 40 years for both of us for just over £30 pm) and my OH could start paying into co pension where his employer will also double what he pays in.

My OH is understandably worried about cancelling critical illness, so we thought we'd ask what people on here think.

Do you have a critical illness cover? Do you consider it a luxury? What are your thoughts on cover v pension?

Thanks in advance

Linton

You probably wont need critical illness cover. And you have partial (or more) cover from the employer for both long term illness and serious accident. You will need provision for your retirement. To turn down a large employer contribution to a pension is madness.

Also, the company pension may well include death in service cover - something to check.

kingstreet

Baking_Mad wrote: »

his work provide sick pay for up to 6 months and also in case of bad illness if unable to return to work his co will pay 75% of last p60 until retirement age (however I believe it's to co discretion)

Can you clarify how this benefit is provided?

A discretionary payment is one on which you really cannot rely. I would suggest you consider replacing this uncertainty with income protection from the point your husband's employer stops paying him.

This may be better value than critical illness cover, which only pays out in the event of a diagnosis of a set severity of a particular condition, which may not stop you working.

jonesMUFCforever

If you are diagnosed with a critical condition you may not be around to pick up your pension.
On the other hand if you don't have much of a pension you will be skint in old age.

kingstreet

jonesMUFCforever wrote: »

If you are diagnosed with a critical condition you may not be around to pick up your pension.
On the other hand if you don't have much of a pension you will be skint in old age.

Quite.

Protection planning and retirement planning are two different things.

Baking_Mad

kingstreet wrote: »

Can you clarify how this benefit is provided?

A discretionary payment is one on which you really cannot rely. I would suggest you consider replacing this uncertainty with income protection from the point your husband's employer stops paying him.

This may be better value than critical illness cover, which only pays out in the event of a diagnosis of a set severity of a particular condition, which may not stop you working.

Hi, it's 100% of income for 6 months which then goes down to 75% at discretion of companys insurance provider. In the time my OH has worked for the company there has been an example when company agreed to 75% annual income payout until NRA due to cancer diagnosis for one employee. Death in service is 3.5 times salary.

How easy is it to obtain a quote for an income protection policy? Can we do it on moneysupermarket or will we have to go to an IfA?

Thanks

dunstonh

Food or water?

vaio

any sort of payout from an insurance company which is "at their discretion" is unusual to the point I suspect you might have misunderstood.

Might be worth clarifying

Baking_Mad

vaio wrote: »

any sort of payout from an insurance company which is "at their discretion" is unusual to the point I suspect you might have misunderstood.

Might be worth clarifying

Ok, we didn't misunderstand.

What I meant by "at the insurance company discretion" is that they would have to see the proof from the doctor, etc in order to authorise the payment ( as indeed with any other type of insurance). Once authorised by the insurance co the employer will pay out 75% of salary till NRA.
My OHs employer provides this cover as a benefit to employees but can, however, decide to withdraw this benefit at any stage if they wish.

Hope this makes sence.

Baking_Mad

jonesMUFCforever wrote: »

If you are diagnosed with a critical condition you may not be around to pick up your pension.
On the other hand if you don't have much of a pension you will be skint in old age.

Correct me if I'm wrong but wouldn't I (as a spouse) be eligible to pick up my OHs pension in case of his death?

Baking_Mad

dunstonh wrote: »

Food or water?

You are, of course, right (in theory) but in the current economic climate when most families struggle to make ends meet from month to month paying for both "food and water" is becoming increasingly hard if not impossible.