Critical Illness cover, options?

weston800

Hi all,

My partner and I are in the process of buying our first home. Our mortgage will be £142,200.

Our mortgage broker is pushing us to get life insurance (decreasing term to cover the mortgage) which includes critical illness cover. I'm sure he's pushing it as he wants his commission, fair enough BUT do we REALLY need it? I completely understand the importance of it but we don't have dependents and not planning on them anytime soon. We're 29 & 27 (partner is a smoker).

The cheapest cover we've found is £47 a month (for the both of us). I'm not trying to be a skint-flint but that's £564 a year which is the same as one month mortgage payment!

Life insurance alone is only £10 a month, it's the critical illness cover (and partner being a smoker) that increases the cost so much.

Any advice would be greatly appreciated.

Thanks

Emma

kingstreet

Cheap critical illness cover is probably about as much use as a chocolate fireguard.

Look here for the best products;-

https://www.defaqto.com/advisers/ratings/star-ratings/life-and-protection/critical-illness-decreasing-term/

Long-term income protection, otherwise known as Permanent Health Insurance is probably a better option as it ensures you can pay your mortgage and maintain your standard of living if unable to work due to sickness or disability for your whole working lifetime.

Andy_L

weston800 wrote: »

Hi all,

My partner and I are in the process of buying our first home. Our mortgage will be £142,200.

Our mortgage broker is pushing us to get life insurance (decreasing term to cover the mortgage) which includes critical illness cover. I'm sure he's pushing it as he wants his commission, fair enough BUT do we REALLY need it? I completely understand the importance of it but we don't have dependents and not planning on them anytime soon. We're 29 & 27 (partner is a smoker).

Other than perhaps each other. If one of you dies/has to stop work can the other afford to service the mortgage alone?

Weighty1

If one of you suffered a critical illness, such as cancer, and you couldn't work long term then how would that impact your ability to pay the mortgage? When thinking about this, also think how the non-ill person would be impacted if their partner was going to hospital for chemo or radiotherapy. Would they still be wanting to trundle off to work every day to ensure money was still coming in?

Critical illness is a waste of money if you never need to claim. It would probably be the best money you've ever spend if you DID need to claim though.

I fully agree with Kingstreet though that long term income protection is generally a better option as you can ensure the mortgage payments can be met AND the majority of your other expenditure.

weston800

Andy_L wrote: »

Other than perhaps each other. If one of you dies/has to stop work can the other afford to service the mortgage alone?

No, we couldn't. I'm just wondering if there are other ways around it

lisyloo

weston800 wrote: »

No, we couldn't. I'm just wondering if there are other ways around it

Not sure what you mean there.
Options I can think of are:
1) get a lodger to suplpement the mortgage in the event of death
2) do you both have pension funds? they mght pay out on death although at your ages you might not have enough to cover the mortgage
3) cover that particular risk with life insurance only (which is quite cheap)
4) just wing it - not necessarily the most sensible but this IS an option for you

DO check what your employers both offer. Some offer life insurance which may be attached to the pension and some offer PHI. It's worth making suer you've chceked this out before paying for anything.

As regards health personally I think permanent health insurance is better than critical illness.
Permanent health pays an income until you retire or die.
Critical illness only pay for certain illnesses and only pays a lump sum which could run out if you were unlucky enough to be off work for the rest of your life. In my opinion a lump sum is more suited to pay for treatment and alterations to you home or short term illness NOT long term.
If you do investigate PHI make sure you talk to someone who is independent and able to offer you products across the market and not just their companies products.
Also with PHI make sure you're covered for YOUR profession i.e. you don't have an insurance policy that says you can flip burgers if were a previously barrister.
Again I would state that taking a risk a winging it IS an option for you and many people do this. I am not trying to promote it but if you both have caring families who wouldn't leave you on the streets if you fell on hard times, then sometimes it IS valid to decide to take a risk.

You need to consider both the likelihood of the event (unlikely but CAN happen to anyone) and also the consequences.
You don't have children so if one of you dies there is a capable adult left with one income who could decide to get a lodger and does possibly have supporting family so won't be left on the streets if worst come to the worst. That's not the same as having children and losing the entire family income.

ACG

Speak to your broker.
Life and CI is expensive without doubt. I am with kingstreet in that PHI is for me a far better product - it is jsut a little more complicated to explain and it is surprising your broker has not mentioned it to you.

Nobody can really afford life critical illness and income protection to cover everything. However there is normally some room for manouvre, for example, rather than doing £142,000 cover over 25-30 years, what about £142,000 life cover and say £50k CI cover on a level basis?

PHI pays a monthly amount and is designed to replace your waged, but you could take out a policy for say £750 a month, which would probably be enough to cover the essentials and if you are unable to work long term, you are at least not worrying about the bills - especially important if you have had a heart attack for example. You might not have money to spend on holidays and take aways, but likewise you know you are not going to be evicted.

One good thing about Critical illness cover over income protection however is that the lump sum can be used for anything. If you have something recoverable it could be used to pay off the Mortgage, if you have something that you are not going to recover form then it will pay for you to go on hoilday. But for me, the stand out point is that as good as the NHS is, it does not cover everything. My mates dad has cancer and he is heading off to Europe somewhere for some new treatment that is not on the NHS but costs tens of thousands of pounds. My mates family are quite comfortable but this has stretched them financially.

If you are not happy with the quote, go back to your broker and tell them you like the idea of life/CI/PHI but you ar enot comfortable spending £50 a month on it and give them a budget to work to.

I wont lie, the commission on protection is nice, but if you cancel the policy within the first few years a percentage of it gets taken back. So I would always rather sell £10 policies with very little commission and it stay on the books rather than £50 policies that come off 12 months down the line.

I promise that is not my normal sales spiel. I feel like I can put more on here than if I was talking to an actual customer as it is less salesy when I am talking to someone who is not a customer.

weston800

Thank you everyone, very much appreciated I am thinking I'll take life insurance with a lump sum critical illness of around £35K. This is only £25 a month which I'm happy to pay and if I do it via Top Cashback, I'll get a couple of hundred back!

I will certainly do some more research before making the final decision though.

OnanTheBarbarian

I was grateful for the Critical Illness policy we took out when we got our mortgage in 2002. I resented the payments made each month, but at the age of 42, I was diagnosed with Stage 4 bowel cancer this January.

The CIC claim took 14 days to settle and mortgage cleared. Glad not to be leaving my wife with a mortgage to service on her own.

You take your chances at the end of the day.

weston800

OnanTheBarbarian wrote: »

I was grateful for the Critical Illness policy we took out when we got our mortgage in 2002. I resented the payments made each month, but at the age of 42, I was diagnosed with Stage 4 bowel cancer this January.

The CIC claim took 14 days to settle and mortgage cleared. Glad not to be leaving my wife with a mortgage to service on her own.

You take your chances at the end of the day.

Thank you for your honesty. I don't know what to say other than I am truly sorry to hear of your news, you are very brave to have been so open about it.

Wishing you and your wife all the very best.

dunstonh

weston800 wrote: »

Thank you everyone, very much appreciated I am thinking I'll take life insurance with a lump sum critical illness of around £35K. This is only £25 a month which I'm happy to pay and if I do it via Top Cashback, I'll get a couple of hundred back!

I will certainly do some more research before making the final decision though.

Do remember that not all CIC plans are created equal. You could pigeonhole the various plans into budget, standard and comprehensive. So, make sure you don't save a few pennies to get a budget level plan when a standard/comprehensive cover plan is a better option.