Income Protection\Life & critical Illness

BKD1972

Hi
I'm after a bit of advice about the above. I have no dependents.

I am 46 and currently have a life/critical illness policy that pays out 94000 in the usual circumstances. This policy expires in 10 years time.

My pension pays out a death in service lump sum of 82000 and 6000 every year to my named beneficiary in the event of death.

I've been advised to get some income protection insurance for my desk based data job. I get 6 months full pay and 6 months half pay from my employer in the event of sickness. After that, nothing.

I'm not sure what to do to be honest. What do others think? these are my options.

Keep the life/critical illness and get the income protection too?
Cancel the life/critical illness and just get the income protection?
Stick as I am with just the L&CI?

I Keep going from scenario to scenario so would just like to get others thoughts

Thankyou

SonOf

Income protection (the Permanent Health Insurance type. Not the PPI type) is above CIC in the pecking order of priority.

CIC and IP do not overlap. So, ideal scenario is to have both. However, if you are only going to have one, then IP is better.

sal_III

Is your critical illness paying 94k or just the life insurance part of it? £94k critical illness is a lot and the premiums are likely sky high.

Income protection is not a replacement for life insurance, unless the death in service payout is enough to pay out the mortgage or at least doesn't leave your dependants less well off in an event of your death.. Even then it's prudent to have your own policy now, while it's cheaper, rather than in a couple of years time when you might have left your current employer for whatever reason.

Only you can answer the question, whether you need IP insurance. It's just a benefits/cost analysis based on how likely it is you would need the payout.

BKD1972

sal_III wrote: »

Is your critical illness paying 94k or just the life insurance part of it? £94k critical illness is a lot and the premiums are likely sky high.

Yes, 94000 CI. I took it out 16 years ago

sal_III

SonOf wrote: »

CIC and IP do not overlap. So, ideal scenario is to have both. However, if you are only going to have one, then IP is better.

They do overlap if your main concern for loss of income is health issues, not unemployment. In which case CIC is better £ for £ in terms of premium/payout.

For people with little/no unemployment concerns CIC might make more sense. Especially when paired with some extras like Aviva+ addons that cover the family and offer medical treatment abroad.

BKD1972

My issue with this L&CI policy is that it expires in 10 years when I'm 56 so I'm thinking is it worth carrying on with it when it expires before a period when I'm most likely to be ill and with years left on the mortgage.

A bit more info. The IP cover is for sickness not employment

sal_III

BKD1972 wrote: »

My issue with this L&CI policy is that it expires in 10 years when I'm 56 so I'm thinking is it worth carrying on with it when it expires before a period when I'm most likely to be ill and with years left on the mortgage.

A bit more info. The IP cover is for sickness not employment

If your life insurance expiration is not aligned with when you expect to have the mortgage paid off, you should really look at it.

Makes sense for the cover provided by your employer to be for sickness, not unemployment.

My personal pet peeve with IP is that in reality, unless you have severe difficulties finding a job for non-medical reason, it's poor value for money. The ones that start paying in the first 3-6m when it matters most (when the redundancy pay is gone and you are still looking for a new job) are pricey. The cheap ones start paying after 12m, if you expect to be unable to find work for 12m+ IMHO the £100s/year in IP premiums would be better spend on re-training/career switch (or better yet, don't take a mortgage)

An exception to the above is if there is a relatively high probability that a non-critical illness, might lead to loss of job (for example your job is physically demanding and a you have a severe bone fracture, that might affect your ability to perform the job in the future).

BKD1972

One of my scenarios is I don't need life insurance and CI because I have no dependents and the sale of the property or savings or death in service would cover expenses on death.

My only reason for having this would be to ease money worry and allow me to be comfortable if i was diagnosed with an illness. But, that finishes in 10 yrs as previously mentioned. I'm considering cancelling this.

Unsure if thats an acceptable approach

The income protection policy would cover my bills after the first 6 months. anything above and beyond that would be a bonus.

Having both is possible, just not sure if its worth it.

sal_III

If I didn't have dependants I wouldn't bother with life insurance at all. Especially with the death in service provided by the employer.

Just an appropriate for my circumstances combination of PHI / IP / CIC

BKD1972

So. I think maybe the best, most sensible option would be to keep the current L&CI policy (that I got a good deal on £28 a month) and take out an IP sickness policy also with a view to building up savings for when the current L&CI policy expires in 10 yrs. The current L&CI is so good a deal I wouldn't want to cancel and start with just a CI one.

At least then I have peace of mind knowing I'm covered for income and CI in the next 10 yrs and by that time I'll have savings plus other.

Thanks for your help on this both of you.

kingstreet

sal_III wrote: »

They do overlap if your main concern for loss of income is health issues, not unemployment. In which case CIC is better £ for £ in terms of premium/payout

Neither CI nor PHI have anything to do with unemployment.

The point here is that you can make a claim on PHI due to "being unable to perform the functions of your usual occupation" while CI is limited to a set level of severity of a named condition.