Critical Illness and Income Protection

Dr_Crypto

Hello,

After discussion with some colleagues I have been reviewing my coverage and am concerned I am underinsured. I took out the polices back in 2009 when I had just started work, and have not reviewed them since.

Essentially, how do I assess what level of cover I need from my policies?

I currently have about £200k critical illness and £1.6k pm income protection. The latter is composed of two policies with deferment periods based on my work sick pay (6 months full then 6 months half).

I am in my mid 30s, no dependents, and am in good health. My present gross earnings are about £70k pa. I have a modest mortgage (£120k) on a repayment basis. I have no loans or debts.

Colleagues have told me that I am grossly underinsured and should have about double the level coverage that I currently have. Before I approach an IFA what sort of things should I be thinking about?

Thanks.

csgohan4

will your income protection cover your mortgage and daily living expenses to make you comfortable?

1.6k is not much for a 70k salary. Discuss with your IFA and consider increasing this amount

Also life insurance is cheaper the younger you get it, should you have dependents in the future

ACG

There are 2 ways to look at this...
How much can you get and how much do you need.

On your income, you could probably get around £3,500 a month on income protection. So from that perspective, you are under insured. But if you look at what you actually need each month to cover the basics (mortgage, utilities, council tax and food), you are probably spending about a grand a month. That means you have £500 a month more than you need to keep a roof over your head and to pay your bills.

On £70k a year you are going to be used to probably spending that on "stuff" so you need to determine how much over the grand you want for that. I would not say you are under insured, unless you have a lot of debt/commitments but you are probably at the baseline.

There tends to be a toss up between what you need and what you are happy to pay. That is the bit that needs thinking about.

We are a similar age and you have more cover than I do and deal with this sort of thing every day. Personally I opted against Critical Illness but I am a big believer in income protection.

You will have more cover than most, you have a level of cover that probably means if you could not work, you could at least stay in your home, pay the bills, have sky sports and probably get the odd take away, but there probably will need to be some cut backs.

Dr_Crypto

Thanks, both.

You've given me something to consider before I see a IFA. I guess my feeling is that I'd like to increase income protection to about £2.5k pm which would give me a little bit more to pay for holidays etc.

I guess the critical illness is less important in some ways. Depending on what went wrong with me it would pay for any adaptations to my house, clear the mortgage, or have a nice time before "the off" so maybe increasing my coverage a bit would help.

income protection seems vital though.

FIRSTTIMER

I have both policies and have much more IP. I did it for the full £3k which is what the maximum L&G would give based on my salary and fixed the premium until age 65. I am happy with that due to inflation/pay rises and decreases I am covered up to that depending on my job at the time. It worked out at around £26 a month.