Critical Illness Cover - FTB

mjb1974

Hi there,

I'm a first time buyer and while going through the stresses and strains of mortages etc have also been trying to sort out and budget for all the other expenses that come with buying a home.

I have great life cover (4 x salary) through my pension scheme already but really dont have a clue about critical illness cover.

What are the pros and cons of this or is it a necessity?

Any opinions would be very helpful

_Andy_

http://en.wikipedia.org/wiki/Critical_illness_cover

mjb1974

_Andy_ wrote: »

http://en.wikipedia.org/wiki/Critical_illness_cover

Thanks but I was more looking for opinions! Appreciate the help though:T

kingstreet

It may be a better idea to look at Income Protection.

How long would your employer continue to pay you if you were off work due to accident or sickness? How much would they pay you? What would happen when they stop? How would you pay the mortgage and the bills?

Income Protection (or PHI) is a tax-free monthly income benefit, paid from the point your employer salary payments stop, if you are unable to work due to illness or injury.

If, for example, you would receive full pay for six months, then half pay for a further six months, you make this cover cheaper by opting for it to start after twelve months, when your employer stops paying you. The benefit is paid until you are fit enough to return to work, the end of your chosen term, or your (if selected) retirement, whichever comes sooner.

“Own occupation” cover is the best, as this pays out if you can’t do your own job. Some budget plans offer cover on a “work tasks” basis and only pay out if you can’t use a keyboard, pen etc.

As critical illness cover only pays out if you get one of a list of illnesses and often upto a minimum level, you can get a payout on your income protection well before you could make a successful critical illness claim.

ACG

Critical Illness is a great product - ive seen payouts for £100k plus and the changes its made to their circumstances has been amazing. Imagine having a heart attack or cancer and having to go through all of the surgery etc - the last thing you want is the stresses of knowing you need to get back to work to pay the bills.
(Sorry for sounding really salesy on that paragraph... i've just read it back to myself).

But i personally prefer PHI/Income protection (not to be mistaken with the insurance policy that only pays out for 12/24 months). That will pay out not only on the 30-40 conditions that critical illness will pay out for, it will also pay out for things like Bad back or stress.

OK, it wont pay out £100k in a lump sum which im sure we would all love. But it would pay out the bulk of your wage month after month, which in some circumstances can amount to more than a 1 off lump sum.

Both have their place, but on a personal level i only have the income protection policy.

busicat

I'm convinced both these payouts, by keeping stress levels down, contributed to my road to recovery! So am a huge advocate. But nothing's a panacea.

Agree with ACG PHI is more important because it covers a lot more situations where you not might be able to work due to illness. (CI is a bit random in that respect). So obviously you're much likely to claim on it so it's harder to get, more expensive and involves more room for debate at claim stage.

Main thing to realise with PHI though is that "own occupation" is usually judged by inability to do any job falling into your category of occupation, as opposed your own actual job, which can be a catch-22 and was one way my claim was initially turned down. I asked the Treasury's Simple Products Review people to see if they can sort it, but I'm expecting disappointment when they report back (any day soon??)

ACG

I think you have them mixed up...
Own occupation will pay out if you are unable to do your own occupation - any occupation is where you are unable to do any job.

Own occ is the better of the 2.
Some occupations may have to settle for own or suited (for instance if you were a surgeon and lost your hand, it might be reasonable for them to expect you to go back to work as a GP for instance).

busicat

ACG wrote: »

I think you have them mixed up...
Own occupation will pay out if you are unable to do your own occupation - any occupation is where you are unable to do any job.

You wouldn't be the first industry insider to think I've got this mixed up - as I too would have assumed the same as you for most of my time inside the industry until near the end...and even as "technical expert" people didn't believe me!

But you can check it out on the [FONT=&quot]Ombudsman's income-protection-insurance fact sheet (p3) explaining PHI own occupation:
"This requirement is not normally job specific. The consumer has to be unable to carry out the general duties of the occupation they were following before their disability.
"[/FONT]This means that a total inability to carry out the essential duties of the occupation in general (say, book-keeping) is necessary, to make a claim possible under the policy – rather than being totally unable to carry out the essential duties of, for example, the specific post of head book-keeper at the consumer’s actual employer."[FONT=&quot] (Sorry cdn't give the link as newbie)

So in my case, one of the many reasons for trying to turn my claim down was that I'd be able to do part of my role using voice recognition (VR) technology. However for various (good) practical reasons, that was not a solution available with my then employer. So the standard of disability was judged according to a theoretical equivalent role, assuming that other offices in my field do provide VR. (No evidence was given of the truth of that.)

A catch-22 then for anyone with this sort of situation...just supposing there was another job available and in a suitable location, what would be the chances of being successful in being chosen for it whilst signed off sick from current job?!

If the Sergeant Review of Simple Financial Products due out soon was to achieve just one thing, getting this sorted out would get my top vote! Not holding my breath, but do feel strongly enough that I bothered to do an individual response to the review.

Maybe if more people knew and campaigned about this, it would stand a better chance of being sorted. Which would be fab, given this is arguably the most important life product of the lot.[/FONT]

Maybe one for Martin to get his teeth into after his triumph with getting financial education into schools?!:money:

ACG

According to the ABI Statement of best practice....

Own occupation wording should follow something similar to this:

Totally unable by reason of illness or injury to follow their own occupation(s) (as stated
herein) and is not following any other occupation.

Any Occupation wording should be along these lines:

“Totally unable by reason of illness or injury to follow any occupation. This means that if
after that injury or the onset of that illness there is an occupation that you are able to
perform, irrespective of whether or not you do so, you will not receive payment”.

This link hopefully works...

busicat

ACG wrote: »

According to the ABI Statement of best practice....

Own occupation wording should follow something similar to this:
Quote:
Totally unable by reason of illness or injury to follow their own occupation(s) (as stated
herein) and is not following any other occupation.

Yes, that's right. (I promise you I know the difference with “own/suited” and “any” occ versions.) What's not expanded on in this SOBP though is what exactly they mean by "own occupation". But they come clean in the more recent SoBP for the equivalent definition where own occupation defines disability in Critical Illness:


“Terms that are used in definitions
2.13 Occupation
A trade, profession or type of work undertaken for profit or pay. It is not a specific job with any particular employer and is independent of location and availability.”
Then they show later at 4.5 (p.9) how it's used for own occ:
"Own occupation means your trade, profession or type of work you do for profit or pay. It is not a specific job with any particular employer and is irrespective of location and availability."

Hence the FOS consumer guidance showing how this works out in practice. (There's a ban on Newbies adding links, but it's not hard to find in income protection one among their fact-sheets.)

Not what we all thought, eh?

ACG

Its income protection for your own occupation - not own job.
Nobody expects it to be with the same employer doing the same job, you couldnt take 5 years off due to stress and then return to the same job you previously had with the same employer... you might get lucky but its unlikely.