how much should we spend on life assurance and critical illness cover?

jop8383

Hi
We have just applied for joint mortgage for 225k for a new home. Neither of us could pay for the mortgage by ourselves. Our mortgage advisor suggested a life assurance policy with critical illness that covered the full amount of the mortgage but it was £120/ month. I wasnt happy with that so he suggested one that only paid out half the mortgage amount but its still coming out at nearly £90/month. I think that seems a lot. We are both 30, healthy and seems a lot extra to pay per month. Is this a lot or pretty average? How much should we get cover for? And how much do others pay?
Thanks

marathonic

Do you have Income Protection through work? If so, you'll still have an income through it if you should become ill to the extent that you can no longer work. Therefore, only Life Insurance should be needed.

It's worth remembering, you could get a critical illness that's not on the list for the policy you take out and wouldn't get a payout anyway.

Whatever you get, if you get it through the bank, it'll likely cost you more than double what you could get elsewhere.

For example, you should be able to get the Life & Critical Illness policy you refer to above for around £60 per month. If you don't need the Critical Illness portion of the coverage, you could get it for about £12 per month.

The above assumes that you are non-smokers and it's a decreasing term policy you need, i.e. your mortgage is a repayment mortgage. The quotes can be got through Cavendish Online or Moneyworld.

Make sure to write the policy in trust. Ask more questions here if you need more information on that.

stephenni1971

marathonic wrote: »

Do you have Income Protection through work? If so, you'll still have an income through it if you should become ill to the extent that you can no longer work. Therefore, only Life Insurance should be needed.

And if you change jobs you may lose any work related benefits


It's worth remembering, you could get a critical illness that's not on the list for the policy you take out and wouldn't get a payout anyway.

Whatever you get, if you get it through the bank, it'll likely cost you more than double what you could get elsewhere.

More than double, really?


For example, you should be able to get the Life & Critical Illness policy you refer to above for around £60 per month. If you don't need the Critical Illness portion of the coverage, you could get it for about £12 per month.

How can you possibly say that? have they any medical or family history? What are their ages?

The above assumes that you are non-smokers and it's a decreasing term policy you need, i.e. your mortgage is a repayment mortgage. The quotes can be got through Cavendish Online or Moneyworld.

And how did you know the mortgage term when running these prices?



Make sure to write the policy in trust. Ask more questions here if you need more information on that.

A couple of comments...

marathonic

stephenni1971 wrote: »

Do you have Income Protection through work? If so, you'll still have an income through it if you should become ill to the extent that you can no longer work. Therefore, only Life Insurance should be needed.

And if you change jobs you may lose any work related benefits

If a person has benefits through work, should they overinsure or take the benefits provided into consideration and review their coverages if/when they change jobs? You seem to be suggesting that you would have them take out insurance that they don't actually need to cover the possibility of a change in jobs.

It's worth remembering, you could get a critical illness that's not on the list for the policy you take out and wouldn't get a payout anyway.

Whatever you get, if you get it through the bank, it'll likely cost you more than double what you could get elsewhere.

More than double, really?

Yes. The original quote the OP provided was £120 per month. The quote returned by Cavendish Online and Moneyworld over a 30-year term for healthy individuals was less than half this for most providers.

For example, you should be able to get the Life & Critical Illness policy you refer to above for around £60 per month. If you don't need the Critical Illness portion of the coverage, you could get it for about £12 per month.

How can you possibly say that? have they any medical or family history? What are their ages?

They say "We are both 30, healthy". This leads me to believe that they are both 30 years old and healthy As I say in the following post, if it's a non-standard case, a person may be better using an IFA: http://forums.moneysavingexpert.com/showthread.php?t=4470641

The above assumes that you are non-smokers and it's a decreasing term policy you need, i.e. your mortgage is a repayment mortgage. The quotes can be got through Cavendish Online or Moneyworld.

And how did you know the mortgage term when running these prices?

I assumed 30 years and it's this assumption that led me to quote around £60 per month. It may be a bit higher or lower with a varying term. For the 30 year term, most providers came in at under £60 per month.

Make sure to write the policy in trust. Ask more questions here if you need more information on that.

A couple of comments...

A couple of comments...

Op, have a read of the post I linked to above. It'll remove some confusion.

ACG

Its better to be overinsured...
An employer can remove employee benefits at any point (I say that as someone who has experienced it twice). You could be made redundant, you could move companies....the list of possibilities is quite long.

By which time the OP could have had any sort of medical conditions. If they then tried to take out cover themselves they may be un-insurable, incur a loading or just generally have to pay more per month as they left it later in life to take out the policy.

OP - i personally think PHI/Income protection should be looked at above Critical illness cover. You can cover upto around 60% of your pre tax income... but you can cover less - ie your half of the bills.

There are ways to work to a budget and it may not always be possible to cover what you want/need in that budget but its usually better to atleast make a dent into it. If you can afford say £50 now, your going to struggle to cover you bills if or when you have to rely on only 1 income.