Life Insurance Quote

lebowski1980

Hi all

Just a quick check against a quote from Direct Line for Life Insurance before I proceed if anyone could give some feedback. Just want to make sure this sounds about right.

Myself - 39 years old - ex-smoker, currently vaping
Partner - 36 years old - ex smoker, not smoked for over 2 years

Life insurance quote based on 300k mortgage on reducing value basis comes in at £45 per month. Adding critical illness takes this to about £70. Quote received includes 10% discount as have car insurance with them.

Many thanks for reading

lisyloo

You do realise critical Illness is quite limited and provides limited financial help?
Permanent health insurance is much better as it provides an income until retirement (or you can work again), if you can’t work. It’s not limited to a list of critical illnesses.

I don’t understand why critical illness is so popular?
Maybe it appeals to people emotionally when you say the C word.

If you happy with what you’re getting that’s fine, but just be aware if it’s limitations.

Do either of your employers offer PHi?

SonOf

Adding critical illness takes this to about £70.

Critical illness coverage varies quite a lot across providers. Premium should not be the only consideration. Often the better ones are not that much more expensive (sometimes only pennies). So, dont buy on price alone.

I don’t understand why critical illness is so popular?

Easy to sell. Many PHI providers still use paper applications and ask more questions than critical illness cover. That doesn't work well with online comparison sites or the direct sales forces. So, they stick with life assurance and CIC instead. It's not the consumer's best interests but the selling company. And in this case, it is working as the OP is considering buying a product that is not likely to be the best option but Direct line will still get their commission.

sal_III

Seems steep for basic Life insurance.
I'm with Aviva for example:
Myself 40, non-smoker - £24/m for £400k life insurance + £12/m £50k critical illness
other half 33, ex smoker for over 2 years - £12ish/m for £250k life insurance + Global doctors extra which pays for medical diagnosis and treatment abroad for a list of critical illnesses for the whole family.

this is with 10% discount for having existing pre-mortgage life insurance with them

Weighty1

The premiums you have quoted don't sound right. Normally, life insurance is 4-5 times cheaper than critical illness because you are 4-5 more likely to suffer a critical illness than to die at any given moment.

I've just been on the DL website and can see that the cover is provided by AIG and the critical illness is their KEY 3 cover which only covers 3 critical illnesses, cancer, heart attack and stroke so it's a VERY limited critical illness plan. Most providers cover at least 30-odd conditions and the more comprehensive cover significantly more than this (up to about 80 in some cases)

I expect the quote will show that the critical illness isn't for the full mortgage amount as the cost would be significantly higher if it was.

Normally the Key 3 plan is only a few pounds more expensive than a much more comprehensive critical illness option so makes little sense.

Personally, I think you'd be better off taking some advice from an independent adviser, not just looking at what Direct Line can offer, especially when their life/CI insurance offering IS available via brokers, which is normally their biggest selling point.

sal_III

lisyloo wrote: »

I don’t understand why critical illness is so popular?

Can't comment for other people, but for me as a contractor any form of income protection insurance comes at excessive premium, the math just doesn't add up. Especially given the fact that my line of work allows me to keep working with most critical illnesses.

As most contractors I have reserves for 6m+ monthly outgoings. The reason I took critical illness is to eventually pay for 2nd opinion, faster/better treatment, given the backlog at NHS, rather than income replacement. If it's terminal the cover will work as a stop gap until the life insurance kicks in.

lisyloo

The reason I took critical illness is to eventually pay for 2nd opinion, faster/better treatment

I can see the logic to that, but you've only be covered for whatever is on the list of critical illnesses (which I expect you know).


If you are terminal you will get access to your pension fund.


In your case I can see why it might make sense, but in general covering not working and income makes more sense than only some illnesses and a limited sum.

lebowski1980

lisyloo wrote: »

You do realise critical Illness is quite limited and provides limited financial help?
Permanent health insurance is much better as it provides an income until retirement (or you can work again), if you can’t work. It’s not limited to a list of critical illnesses.

I don’t understand why critical illness is so popular?
Maybe it appeals to people emotionally when you say the C word.

If you happy with what you’re getting that’s fine, but just be aware if it’s limitations.

Do either of your employers offer PHi?

Thanks for response. I'm not set on critical health. I do have an option for private health through my employer but at the moment do not exercise it. Partner is a stay at home parent.

Main thing for me is in the event of my death, then the mortgage is covered. We don't have masses of savings but are working to build these up.

I do also receive death in service from my work which is at 3 times salary i think. Would pay off about 60% of the mortgage. I'm wondering if this means i only need to insure the gap?

lisyloo

Be careful not to mix up private medical and permanent health.

Permanent health pays an income if you can’t work due to health up until return to work, retirement or death.
Private medical pays for private treatment. It means you can get seen straight away or at your convenience (So you can organise a hip operation after a holiday or wedding for example).
Critical illness only covers certain illness and pays a lump sum. This could be used for house adaptations, treatment, bucket list or income but won’t necessarily last for income if your ill long term and it’s a fixed sum. Personally I see that as a luxury and have never taken it.

In the event of your death you should be looking to also provide an income for your partner as they cannot both work and be a stay at home parent.
Rule of thumb I’ve heard is 10xincome, but I guess it depends how old the kids are.

Death in service is not recommended by advisors for your needs.
The problem is that should you get ill e.g. cancer and leave your employer, then you’ll find it hard/impossible/expensive to get life insurance, so advice is usually to get your own policy for the whole lot independent of your employer whilst your healthy.
Personally I never went with that advice but there is no adverse medical history in my family so I judged the risk to be low.

Only you can decide based on your personal health, family medical history and job/career history/likely future and how important it is to you (I never had kids but I can imagine that ups the importance).

strawb_shortcake

Critical illness was a god send to us (not that it's paid out quite yet). My OH is a stay at home Dad and it paid out on his heart attack. I think it all comes down to your individual circumstances

SonOf

I do also receive death in service from my work which is at 3 times salary i think. Would pay off about 60% of the mortgage. I'm wondering if this means i only need to insure the gap?

Death in service is more about providing short term cover for loss of income for a spouse/partner and family. It also goes a little way to make up for some of the lost pension.

So, if you are earmarking the DIS against the mortgage, what you are using for your partner in respect of lost income and reduced pension?