Critical Illness Cover or Income Protection

FIRSTTIMER

Hi,


Which would you say is best for a single 35 yr old?


Life Cover with CIC or Income Protection (6 month defer). Both similar price. £40 per month guaranteed price until age 70.


I could stretch to both actually - but is any of them really worth it?

ACG

For me, I would go with income protection every time. It pays out for any illness where as income protection is limited to maybe 55 conditions.

Although, you could potentially look at doing some of both, if for example you have a £150k mortgage and your pay is £2k a month, you could cover maybe £1200 and do £50k critical illness cover? Whilst I would choose income protection over critical illness every day, there is still a need for critical illness.

FIRSTTIMER

I am confused by your first sentence?


So if I have income protection with Liverpool Victoria (its £40 guaranteed premium until 70). I can reduce the premium by reducing the the paid until date - I was thinking changing it to 65 or even 60? Thoughts? Or should I go to full guaranteed term.


I just think what if I stop working at 60?!?!

YHM

Is it realistic you will still be working to 70? If yes, then go for it. If not, I would align to your anticipated state retirement age, which if you are 35, I would expect to be 68.

FIRSTTIMER

I will prob stop working at 65 to be honest. If the spa rises to 70 I will still only work to 65...I reckon I could survive 3-5 years of early retirement

csgohan4

if you have the money, both

Weighty1

Which is best.........who knows?! It depends what condition you're struck down by. If you have a heart attack and only need 3-months off work but can pay your mortgage off then it puts you in a pretty strong financial position. But what if you develop ME and don't work for years? Your critical illness plan is unlikely to pay out but your income protection plan would. In addition to that, most people arrange critical illness to cover their mortgage so the best thing that will occur financially is that you can repay your mortgage saving that expense, but what about your gas, electric, council tax, water, food etc etc etc?

If you can afford both I'd recommend taking both.

Mark_Jefferson

Critical Illness Cover will only pay out once in one cash lump sum. As you're 35, if you developed a critical illness tomorrow and could never work again, you'd have to live off one lump sum for the rest of your life until state pension age.

Income Protection will pay out for anything that medically prevents you from working, whereas Critical Illness Cover only pays out for a set number of serious (critical) conditions, so think cancer, heart attacks and stroke. You could be off work with crippling back pain and your CIC policy wouldn't pay out as it's not critical, but your IP would. IP will also pay you regularly until your policy cease age, whenever you choose to set that.

When it comes to the cease age of IP, you set it wherever you feel comfortable. If you feel you'd be okay to stop receiving payments at age 60 or 65 rather than age 70, perhaps because you'd have pensions or savings to fall back on, then reducing it might make sense. If alternatively you don't think you'd be financially secure by 60/65 then keeping it at 70 might be more sensible. The lower the cease age the lower the cost of the policy, as the risk of you developing an illness/injury post-60 is so much higher.

In addition to that, most people arrange critical illness to cover their mortgage so the best thing that will occur financially is that you can repay your mortgage saving that expense, but what about your gas, electric, council tax, water, food etc etc etc?

This is a very good point. In many cases, CIC and IP are to protect against two different things. CIC pays out one lump sum that's often used to clear a mortgage, whereas IP pays out in small chunks until you retire to keep up your standard of living.

One last point: if you're going to hold IP long-term then many people prefer to index-link the policy so they have the option to let it rise each year with inflation. If you have this policy for 30 years then what the benefit can buy you in today's money is unlikely to be the same in 30 years. Think how much a loaf of bread was 30 years ago compared to today etc.

FIRSTTIMER

My view is I am going to take out both.
Life plus CIC £150k with Legal and General covers the mortgage its £370 fixed per year no indexation until age 70
Income Protect £1500 a month with Liverpool Victoria £40 fixed per month no indexation until 65

ACG

If you do not plan on working to age 70, then there is no need to protect yourself until age 70...for income protection. Critical Illness however, you may wish to cover yourself until 70 or beyond.

Where did you get the figures from? Have you discussed your requirement with a broker? To some extent I hate doing insurance as I feel like a cheesy insurance salesman, but on the other hand there is a definite need for most people. Our job is not to ramp up the premiums and in turn the commission but to get what you need. It is not uncommon for us to work to a budget and get custoemrs a bit of both rather than 100% of everything as very few people can afford to completely cover themselves.

FIRSTTIMER

The quotes are from lifesearch/Cavendish and dewsberry