Both self-employed with mortgage and no Life/illness/Health Insurance

grey_lady

So we obviously need to get some - we can't really afford to spend hundreds a month on it but could spend £100 a month.

I think we need decreasing level-term to pay off the mortgage with a bit left over along with critical illness as we're both self-employed.

I was also thinking about a medium cover level for health insurance - although I'm a bit confused - is the full excess always applicable? e.g if it's just for a one-off physio?

Does the above sound correct?

Many thanks!

dunstonh

I think we need decreasing level-term to pay off the mortgage with a bit left over along with critical illness as we're both self-employed.

Most would prioritise permanent health insurance (best type of income protection) above critical illness cover. CI cover has its purpose but it is a selection of claimable critical illnesses. Income protection is illness.

I was also thinking about a medium cover level for health insurance - although I'm a bit confused - is the full excess always applicable? e.g if it's just for a one-off physio?

I think you are referring to medical insurance (PMI) here rather than health insurance (the latter being income protection). Private medical insurance is a bit of a luxury insurance item. If you are restricting your coverage due to budget then you would normally put PMI at the end of the pecking order.

For example, is just covering the mortgage enough for life assurance? do you have children who would need childcare paid for if one died? Or could the surviving partner live on one income? Then you have income protection but you also need to consider retirement provision. How are your pensions and are they on track to pay what you need? If all this looks rosy, then consider PMI.

InsideInsurance

grey_lady wrote: »

I think we need decreasing level-term to pay off the mortgage with a bit left over along with critical illness as we're both self-employed

Why Critical Illness? What is your plan if you have a major illness that isnt on the CI list or not to their levels and you cannot work ever again?

grey_lady

mmm - many thanks, maybe i am getting a bit mixed up here, I was referring to PMI - I didn't realise that health insurance is the same as income protection - would health ins/income protection replace the level term or is that in addition to?

Covering mortgage would be enough for life insurance.

InsideInsurance

grey_lady wrote: »

mmm - many thanks, maybe i am getting a bit mixed up here, I was referring to PMI - I didn't realise that health insurance is the same as income protection - would health ins/income protection replace the level term or is that in addition to?

Covering mortgage would be enough for life insurance.

Permanent Health Insurance (aka long term Income Protection) pays you an agreed monthly amount whilst you are off sick and unable to work. They typically will pay up to 60% of your normal income but the payment is tax free. You can index link it so that the payments go up each year inline with inflation. This payment continues until you are fit to return to work or your designated date (normally 65th birthday)

There is also ASU (aka PPI or short term income protection) which is similar but pays out a maximum of 12 or 24 months. Given the average PHI claim is about 7 years you can see why people promote it as a better product even if it costs mroe

grey_lady

aha - so PHI could be a better option than level term with critical illness?

InsideInsurance

grey_lady wrote: »

aha - so PHI could be a better option than level term with critical illness?

Life and PHI are two separate things and dont have much/ any cross over.

Personally, rather than professionally, I think PHI is much more important than CI as if you get own profession cover you can pretty much maintain your income level even though you are off sick so afford to pay the normal monthly mortgage payments etc.

CI I am not keen on because of the set list of conditions it covers and set criteria. Some you may find has little or no long term impact and so really, why have the payout? You can also have a major illness but its not on the list so you dont get a penny. We get a few posts on here every month about people who've had open heart surgery and such but CI declined because the method of surgery didnt meet the criteria etc.

ACG

Personally I would choose PHI over Critical illness.
It might not pay a lump sum out but it pays a regular sum each month.

grey_lady

Would PHI cover replace salary alone? what about if your income is made up of salary&div's (company director) or would they try to only pay out based on the salary.

Would you still have level term as well as PHI? I'm guessing you would? (based on 'they don't have much crossover')

InsideInsurance

grey_lady wrote: »

Would PHI cover replace salary alone? what about if your income is made up of salary&div's (company director) or would they try to only pay out based on the salary.

Would you still have level term as well as PHI? I'm guessing you would? (based on 'they don't have much crossover')

The advantage of it being underwritten at the time of purchase is that these things can all be properly confirmed at the time of purchase. They wanted a lot of my accounts etc by certainly my PHI factors in both salary and dividends (but I did want well below 60% of my total income at the moment).

If you are a company director you could also look at Relevant Life Insurance, its a bit of an oddity as its paid for by your company but pays the benefit to your beneficiary. At the moment its tax deductible and doesnt raise any kind of BIK. The monthly price tends to be a little bit higher than normal life insurance but when you factor in the tax savings its can work out cheaper - certainly did in my case.