Critical Illness Cover - Opinions

jroy_998

Hi Guys,

Just wondering if I could get your opinions on critical illness cover and whether you think it's worth it.

We're a young couple and we're due to complete our first house purchase in about a month and we're currently looking to arrange life insurance and we're looking at a decreasing term policy for the mortgage.

My question would be is critical illness cover on top of death only cover worth it? If one of us is diagnosed with a critical illness, as crude as it sounds we would get paid out on death from this condition anyway rather than at the point it is first diagnosed.

I know there is likely to be a period of time between the two, but we were also looking at taking out a level term each for £25,000 which includes critical illness. We're also going to get accident/illness/unemployment cover, which I would hope the illness portion of would take care of things for a while.

If we add critical illness for the mortgage on top of this would it be a bit overkill on the insurance front, or is it worth the extra money putting critical illness on top of the main life policy?

You'll have to forgive me if some of this is obvious, we're sort of new to this kind of thing!

Thanks in advance!

dunstonh

Just wondering if I could get your opinions on critical illness cover and whether you think it's worth it.

If you have a claim then its worth it. If you dont have a claim then its not.

We're a young couple and we're due to complete our first house purchase in about a month and we're currently looking to arrange life insurance and we're looking at a decreasing term policy for the mortgage.

You are more likely to claim on the CI side than the life assurance.

My question would be is critical illness cover on top of death only cover worth it? If one of us is diagnosed with a critical illness, as crude as it sounds we would get paid out on death from this condition anyway rather than at the point it is first diagnosed.

You assume you would die from it. Most people do not.

Are you perhaps mixing up terminal illness cover (which is early payment of the amount) with critical illness cover?

We're also going to get accident/illness/unemployment cover, which I would hope the illness portion of would take care of things for a while.

I would take a CI policy over a PPI policy anyday. However, I would put a PHI policy (permanent health insurance) before both of them (in most cases)

jroy_998

dunstonh wrote: »

Are you perhaps mixing up terminal illness cover (which is early payment of the amount) with critical illness cover?

I don't believe so? I'm thinking of the critical illness option that comes with most life insurance policies.

dunstonh wrote: »

If you have a claim then its worth it. If you dont have a claim then its not.

Goes without saying with any insurance, but is it worth paying the premiums if the other cover we would have in place (Illness & the fixed £25,00 CI) would be sufficient.

Thanks

kingstreet

How long would your employer pay you if you're off sick?

What happens when these payments stop?

How would you pay your mortgage and your bills after this?

Income protection, otherwise known as PHI as dunston has said, pays out (when your employer payment stop) if you are unable to do your own job (provided you pick the better plans) until you are fit enough to return to work, or until you retire if you set the plan up for that period.

You could be in a position where you don't get one of the list of illnesses covered by CI, but still can't work.

It's worth noting, you can use your income protection benefit to pay your CI premiums when the CI doesn't pay out...

dunstonh

I don't believe so? I'm thinking of the critical illness option that comes with most life insurance policies.

Terminal illness cover comes with most life assurance policies nowadays. It used to be an add on with some but most now include it as normal. This is the cover that allows early payment of the life assurance if you are diagnosed as being terminally ill. That is what you described earlier.

Critical illness cover is available standalone or can be bolted on to some life assurance policies. This pays out on the diagnosis of a range of specified critical illnesses. Critical means illnesses are not likely to result in death but create a life changing situation.

Goes without saying with any insurance, but is it worth paying the premiums if the other cover we would have in place (Illness & the fixed £25,00 CI) would be sufficient.

It is a personal opinion. You were talking about taking out a PPI. I wouldnt bother personally. I would favour CI over PPI. However, I would favour PHI over both. Or even have both (a belt and braces option is to have all three as they dont overlap). I know more people that have claimed on CI policies than life assurance and you will find most advisers will say the same.

You also have to look at the risk. What would be the effect of a loss of one income and needing care or having to make adjustments to the house or even have to move to a different house? Could you afford it? If you can, then the need reduces. If you cant then the need increases.

kingstreet

For example, income protection;-

£1,000 per month - 6 months deferred
Male 30NB Non-Smoker
Administrator - Own Occupation
To Age 65
£18 per month.

InsideInsurance

jroy_998 wrote: »

I don't believe so? I'm thinking of the critical illness option that comes with most life insurance policies

I think the point was that with most CI claims the person doesnt die from the condition or at least not for many years. For example loss of an eye, hand, foot etc is covered by most CI policies but you arent going to die of these in most cases.

Terminal illness is a clause on many life policies such that if you have a terminal diagnosis you receive the payout then rather than at death.

You really need to speak to an IFA or a specialist protection broker but if for example you take your Life, £25k CI and ASU policy, how would you cope if you were in an accident meaning you can never work again? The CI pays our £25k, the ASU pays out for its maximum 12 months, after those 12 months how comfortable will your life be living on benefits? Will the £25k been enough to clear the mortgage or at least reduce it enough to be affordable on just one income?

ACG

You are more likely to claim on a critical illness policy than a life policy.
You are more likely to claim on an income protection policy than a critical illness policy.

There are certainly needs for all of these policies for the majority of people.
Whether or not you need them or want them is another matter. Its worth sitting down with a mortgage or financial advisor to discuss all of these with them.

I personally have a house, i have no kids so if i pop it i couldnt care less. If however i was to have a heart attack then i would want to know i had money to cover my bills - whether that be critical illness cover or income protection i dont really care.

Income protection would also cover you for things like stress or a bad back, which Critical illness would not cover you for - so in my eyes income protection is something that should be looked at by pretty much everyone who relies on their income. Its the only policy i have out of the 3.

jroy_998

Thanks everyone,

There's some really useful advice there.

The PHI sounds like it may be good. Certainly better than PPI anyhow.

It sounds like a good option to go for Life Insurance on the mortgage (which is required by the lender anyway), and then each take out a PHI policy to cover any potential Illness. Unemployment cover may come in somewhere too but that's a different story...

stephenni1971

jroy_998 wrote: »

Thanks everyone,

There's some really useful advice there.

The PHI sounds like it may be good. Certainly better than PPI anyhow.

It sounds like a good option to go for Life Insurance on the mortgage (which is required by the lender anyway), and then each take out a PHI policy to cover any potential Illness. Unemployment cover may come in somewhere too but that's a different story...

Sorry but life insurance will very likely not be a requirement of the lender at all. Unfortunately though many banks, building socs and advisers are very careful to give people the impression it is to encourage a sale.

It is a sensible thing to have for sure, but a requirement, no.

jroy_998

stephenni1971 wrote: »

Sorry but life insurance will very likely not be a requirement of the lender at all. Unfortunately though many banks, building socs and advisers are very careful to give people the impression it is to encourage a sale.

It is a sensible thing to have for sure, but a requirement, no.

Yeah they all sort of gave that impression through the application process.

Even if they didn't I'd certainly be taking some out.