Income protection for mortgage?

robedha1

I'm not sure if this is the right place to post this, so apologies if it's not.

I've recently been given quotes for Mortgage and Lifestyle Protection as well as Critical Illness cover. I understand that these will pay the mortgage if I'm unable to work and the former will also cover household spending too.

What I would like to know is, is it worth having this type of cover bearing in mind that I have only had 2 days off work in almost 15 years due to sickness.

I was made redundant last year and was out of work for about 10 weeks. I worked in retail but have since changed to a call centre role which appears to be secure.

Would it be better to save so I have a few months money set aside?

I also have no dependents and the mortgage will be in my sole name.

Any and all opinions are welcome on this.

marathonic

Only you can decide. Past sickness isn't really a guide to future sickness. Just because a person was only off work 2 days in 15 years doesn't make them less likely than others to get a critical illness.

If you got quotes from the bank, don't go there. They're more expensive to the tune of 40-50%.

Try a local broker or get a quote through https://www.moneyworld.com. I recently got a Life and Critical Illness policy through them, decreasing term to cover my mortgage. Mine was written by Legal and General and cost almost half of what the bank that provided my mortgage wanted.

Make sure to write the policy in trust.

Also, what benefits does your employment provide? With no dependents, you may be better off ignoring life insurance. If you have Income Protection through work, it may be sufficient.

robedha1

Sorry, I should have mentioned that I get 3 months at full pay then 3 months at 75% before I would go onto SSP.

Thanks for the advice. I'll try to get some quotes from other companies.

akamustang

I favoured the rainy day fund approach from the beginning.

But I definitely think there is a balance point which makes this approach more beneficial in the long run, if not immediately.

By which I mean you could take out the insurance for a year whilst you're building up your emergency fund, then switch to relying only on the emergency fund, and use the insurance money you save to keep the fund topped up.

I'm surprised they didn't try to offer you life insurance as well.

lessonlearned

I wouldn't take the risk of going without but I would ensure that you shop around and buy a good "stand alone" protection policy rather that one that is linked to a financial product.

I'm afraid I have to agree - past good health is no guarantee of future good health. My OH was Mr Fitness itself until he was struck down by a rare neurological condition which hit like a bolt from the blue.

In this life you never know what fate has in store for you. You just never know what's lying in wait round the next corner.

Better safe than sorry.

If you can't afford critical illness cover, just make sure you have some form of income protection.

ACG

Im a huge fan (as much as you can be anyway) of Income Protection.
You might have only had 2 days off, but you might fall down the stairs tomorrow and break your back - your going to want an income to cover your mortgage and bills - you might even need money for a carer.

Critical illness, im not so much of a fan of. It certainly has its place, but in my eyes you only really need it for a smaller lump sum - to make home improvements (wheel chair access for example). Critical Illness covers about 30 odd conditions, income protection pays out for whatever the illness is that stops you working.

It sounds like the advisor you have gone to has done a thorough job. Whether taking it all out is in your budget is another matter and if not then the advisor can look at reducing the cover in places - some cover is better than none.

But the average claim for income protection is around the 6 year mark, having some money set aside isnt going to keep you going for 6 years.

kpwll

We took out mortgage protection insurance with our mortgage 17+ years ago (through the bank but with Aviva), for 14 years we had no claims and then 2 years running my husband broke the same ankle (he wasn't running when he broke it twice).
We found it a Godsend and will keep it until the mortgage is paid off in a couple of years.

robedha1

Thanks everyone. You've all given me a lot to think about.

Dan-Dan

ACG wrote: »

Critical illness, im not so much of a fan of. It certainly has its place, but in my eyes you only really need it for a smaller lump sum - to make home improvements (wheel chair access for example). Critical Illness covers about 30 odd conditions, income protection pays out for whatever the illness is that stops you working.

Hi

just a quick one , if this is the case why would anyone choose critical illness cover over income protection ?

ACG

It has its place. If you have a heart attack for instance or cancer i imagine receiving a lump sum to clear your mortgage would take a huge worry away from you - which gives you more time to recover.

It could pay for home improvements, care or it could pay to go private for treatment that isnt covered on the NHS. There are a lot of reasons for it.

Income protection replaces your income - but that would still be spent on bills. It might not leave you with extra funds to pay for the above.

kingstreet

Whatever you do, don't take the cheap version of income protection which uses "work tasks" or "activities of work" as the definition on which a claim is decided.

These can be used to deny you a payout because you could hold a pen, or operate a keyboard, being able to do any job, despite you being unable to do your own.

Accept only the "own occupation" definition, which means you get a payout if you are unable to do your own job.

Remember - a claim for income protection benefit may mean you can carry on paying the premiums for your critical illness cover, when you can't claim on that because you haven't suffered one of the forty illnesses badly enough to make a successful claim on it!