Critical Illness or Income Protection?

bigoldbear1970

Hi - any advice gratefully received

I was with a Halifax life insurance adviser during the week who has been advising me to take out a level life policy combined with a Critical Illness plan. She also tells me to consider income protection but as a secondary consideration.
I'm very unsure of the value of having critical illness cover - i know they are limited on the illnesses they pay out on ( although this adviser is trying to tell me that the policy pays out on Cancer - ie not pre cancerous cells but fully formed cancer in any form - funnily enough the policy document doesnt support that)
My circumstances are that I am employed in the same company (BT) for the past 23 years, I have paid off my mortgage, and i'm lucky in that I have no debts - can i get some advice?...would i better with a critical illness plan or with income protection given my circumstances. I get this niggling feeling that the Halifax would "prefer" me to take critical illness for some reason - they are very focussed on it rather than income protection. Even when i mentioned income protection instead of it, they said I COULD have some, but I need Critical Illness too. Am I being sold a dud here or are they correct?

Another question - I know this site recommends i get life cover for 10 times my annual salary which comes out to about 300 grand - the Halifax quote came out at 100, and i get about 90 grand death in service from work. Are they under quoting me?

Im not that familiar with this stuff as you no doubt can tell so I'd really appreciate a steer from people who know the subject

Thanks


Kieran

bigoldbear1970

Critical Illness or Income Protection? Hi - any advice gratefully received

I was with a Halifax lie insurance adviser during the week who has been advising me to take out a level life policy combined with a Critical Illness plan. She also tells me to consider income protection but as a secondary consideration.
I'm very unsure of the value of having critical illness cover - i know they are limited on the illnesses they pay out on ( although this adviser is trying to tell me that the policy pays out on Cancer - ie not pre cancerous cells but fully formed cancer in any form - funnily enough the policy document doesnt support that)
My circumstances are that I have no mortgage anymore, and i'm lucky in that I have no debts - can i get some advice?...would i better with a critical illness plan or with income protection given my circumstances. I get this niggling feeling that the Halifax would "prefer" me to take critical illness for some reason - they are very focussed on it rather than income protection. Even when i mentioned income protection instead of it, they said I COULD have some, but I need Critical Illness too. Am I being sold a dud here or are they correct?

Another question - I know this site recommends i get life cover for 10 times my annual salary which comes out to about 300 grand - the Halifax quote came out at 100, and i get about 90 grand death in service from work. Are they under quoting me?

Im not that familiar with this stuff as you no doubt can tell so I'd really appreciate a steer from people who know the subject

Thanks


Kieran

opinions4u

Personally I prefer income protection to critical illness. It's usually better tailored to your needs. That said, critical illness cover riding on the back of a term assurance policy is often quite cheap.

Are they under quoting me

As you have no mortgage, probably not.

Have you considered seeing an IFA to get an alternative view? I'd expect them to have access to better quality products and / or cheaper premiums.

kingstreet

Another vote for income protection over critical illness here. How do you pay your CI premiums if you get an illness which stops you working, but which isn't severe enough for you to claim for under CI?

Please, please, please do not buy cover from a bank. The cover is normally not as good as you can get from an IFA and the cost is about 40% higher. Even the same contract can be dual-priced and insurers offer the better prices through brokers, so they get the business because there's competition.

Obtain income protection quotes. Always insist on "own occupation" cover, not the cheaper "work tasks" option which is more difficult to claim on. Specialist providers offer own occupation cover, even to those not accepted for such by mainstream providers. IFAs know of these firms.

The amount of life cover you take should be based on the amount of income your dependents would lose in the event of death. How about family income benefit instead of lump sum cover? This pays out as a regular income if you die, payable until the end of the term, which could be your retirement age. It's cheaper, as the cover is effectively decreasing as each year passes and you are still alive.

You are too clued-up to be "sold" to by a bank "adviser." Find a good local IFA and talk to them. On protection, they can still take commission if you'd prefer not to pay a fee.

dunstonh

The question is difficult to answer as they dont overlap and do different things. Income protection is more important. It covers a greater need. After all, you insure you car, house, pets etc. Yet your income is your most valuable asset over your working life. So, if you suffer a claimable event, it is a Godsend to have income protection.

That said, statistically, you are more likely to claim on a CI policy. However, if you suffer a serious critical illness and have to spend time off work, then the income protection policy would pay out.

please note, when I refer to income protection, I am referring to the PHI version. Not the budget PPI plans.

Another question - I know this site recommends i get life cover for 10 times my annual salary which comes out to about 300 grand - the Halifax quote came out at 100, and i get about 90 grand death in service from work. Are they under quoting me?

This site dumbs down many things to cater for the mass market. It is not authorised to give advice. The 10x income is a very old crude calc to make you think of the sort of figure you are likely to need. However, advisers would take other things into account when during their shortfall analysis and you wouldn't be surprised if most people ended up with a figure of less than 10x (or potentially some needing more).

they are very focussed on it rather than income protection. Even when i mentioned income protection instead of it, they said I COULD have some, but I need Critical Illness too. Am I being sold a dud here or are they correct?

Halifax are tied agents of Scottish Widows. They don't have a decent income protection plan. They haven't since the old Black Horse Life days (they had a good PHI policy but then they would when you consider their market back then was aimed at mid worth Lloyds Bank (pre-TSB) days. Lloyds banking group has gone down market since then and it's products have followed that).

Never buy financial products from tied agents. You will pay 30-50% more in premium cost and the products are frequently basic or cut down from what is available in the whole of market.

UniqueName_2

I can only speak from personal experience, but I had a CI payout recently that was much better that PI would have been.

Firstly - my employer allowed me 6 months paid sick leave (of which I used 3) and the CI paid out too. The CI was equivalent to about 18 months after tax salary, as it is a tax-free lump sum payment. The payment was for a cancer diagnosis, but it only resulted in 3 months off work so far.

The CI has been great as I will have significant ongoing costs in my life as a result of the successful treatment. So bear that in mind - even if you can work again, your physical condition may have on-going costs that a CI payout can help with.

helptoyou

A good financial adviser can help you decide whether you need Income Protection insurance or critical illness protection. You may prefer to take out both to be on the safe side.
For example, if a ladder fell on your head which incapacitated you from working for six months due to a bad back, critical illness protection would not pay out, but Income protection insurance set up on a three-month deferment period would. If you were diagnosed as having cancer, critical illness might pay out while, if the disease did not stop you from working, Income protection insurance would not pay out.

Speak to a Financial Advisor giving all relevant facts to them and they will help you decide levels of cover required ETC Its not a question of which is best as they provide different cover needs.

ACG

If its a choice of one or the other i would personally go for income protection.

I would never buy it from a bank as you can usually get the same or better policy from a Mortgage or Financial advisor for less money.

kingstreet

UniqueName wrote: »

I can only speak from personal experience, but I had a CI payout recently that was much better that PI would have been.

Firstly - my employer allowed me 6 months paid sick leave (of which I used 3) and the CI paid out too. The CI was equivalent to about 18 months after tax salary, as it is a tax-free lump sum payment. The payment was for a cancer diagnosis, but it only resulted in 3 months off work so far.

The CI has been great as I will have significant ongoing costs in my life as a result of the successful treatment. So bear that in mind - even if you can work again, your physical condition may have on-going costs that a CI payout can help with.

In a perfect world, you'd have both. If you take income protection until retirement, the amount paid out could be a lot more than a critical illness sum assured. Typically, most people cover the amount of their mortgage by combining life and CI together and don't take additional cover. If the average mortgage is £150k, for a £30k earner, that's just five years earnings.

If that earner took IP for 50% of salary (as the benefit is tax-free) they could get a payout of £15k pa, possibly for 35 years for a 30 year old, or a total of £525,000. That's over 17 years earnings and with a much better chance of being able to claim as they only need to be unable to work, not to have suffered one of a list of conditions and up to a pre-set standard.

I'm glad you got your CI payout though as I wouldn't want to suggest CI isn't a valuable benefit.