Critical Illness or Income Protection?

spidercrab

Hello - I have recently taken over mortgage on my house after joint mortgage with ex-husband. Everything now in my name so I really need to get some kind of insurance in case I get ill or even worse, die! I will definitely get life cover which is quite cheap at about £8 per month (I am in my fifties). However, I have been getting quotes regarding critical illness cover and although these seem sensible, they are expensive and seem to be very specific regarding how ill you need to be before they pay out. I was wondering whether income protection insurance would be a better bet as I feel it would be more useful to have my income covered if I was sick rather than a lump sum and it does seem to be cheaper. I have read different policies but they all seem very confusing so I was wondering whether any knowledgeable people out there could perhaps advise what would be the better value. Any thoughts appreciated.

kingstreet

Yes. Permanent health insurance would be a better choice as it will replace your income if unable to work due to illness or injury.

Choose "own occupation" as it makes the chances of a claim better in the event of being unable to work.

spidercrab

Thanks Kingstreet but sorry to sound a bit thick but is permanent health insurance the same as income protection? Also, what do you mean as "own occupation?"

staffie1

Income protection insures against redundancy, not critical illness.

kingstreet

spidercrab wrote: »

Thanks Kingstreet but sorry to sound a bit thick but is permanent health insurance the same as income protection? Also, what do you mean as "own occupation?"

Top quality income protection is PHI.

The quality version has a better chance of claim if you are unable to perform the essential duties of your own occupation. The cheaper plans only pay out if you are unable to hold a pen, use a keyboard etc.

Critical illness cover only pays out if you get an illness on the list, at the required severity. What happens if the illness you get is neither? How do you pay the bills, mortgage and critical illness cover premiums?

stator

Some income protection policies only pay out for 1 year, so if you are long term sick the cover would be limit. Most unemployment policies only pay out for a year too. So that's why they are generally cheaper.

spidercrab

Thanks everyone - I really appreciate your comments. Still a bit confused as to what insurance to get - don't want to spend a fortune as I am on a low income and just taken on the mortgage, although I do know I have to get some kind of cover. I think the top grade PHI would be a bit pricey so I think it will have to be income protection. Did get a few quotes from Gocompare and monthly premiums ranged from £10.75 per month right up to £135. They certainly don't make it easy!

staffie1

Have you spoken to an independent insurance broker? Some brokers charge a fee, others will be on commission. But they should be able to advise what's best for your personal situation, and set up the policies for you.

dunstonh

Income protection is in permanent health insurance is long term (up to retirement) and does not include unemployment cover. This is generally regarded as the best form of income protection. However, it does come in budget, standard and comprehensive form (not called that but you can pigeon hole plans into those categories.

Payment protection style income protection (PPI) is the real budget end.

CI cover doesnt overlap with PHI (or PPI) and many people get both. However, generally CI cover would be a second or incremental choice to PHI.

InsideInsurance

staffie1 wrote: »

Income protection insures against redundancy, not critical illness.

And this is the problem.

"Income Protection" covers two different products, PHI which is the long term protection for accident and sickness plus short term cover which is ASU (aka PPI) that also covers accident and sickness but also adds on unemployment/ redundancy.

The issue with ASU is that it normally pays out 12 months maximum where as the average PHI claim is over 7 years in length. You will certainly save money getting ASU over PHI but how do you fund you life for the other 6 years?

Some PHI providers do offer a short term redundancy cover as an add on if you are particular concerned about that.