Life insurance, critical illness, mortgage protection

Friday1989

I will hopefully be getting a mortgage soon :eek: I'm expecting the broker to start talking about life insurance, critical illness cover etc so I'd like to have a bit of a better understanding of the difference and which (if any) I need. I've had a little look on the forum but all the threads I've read seem to be people with dependents.

I'm 30 years old. I don't have or want kids and I don't have a partner at the moment but may in future. I have a local government pension (only a year and a half of service) and will be moving to the NHS and rejoining the 2015 scheme soon (only a years service). The LGPS has a death grant and a pension for eligible partners and children. Obviously with such a short amount of service it will be peanuts unless I return to the local authority. I don't understand the NHS pension but there is also a lump sum and pension for dependants. I don't know where I will work for the rest of my career but it will almost certainly by somewhere with LGPS or NHS pension.

If I die with no dependents the flat can just be sold. If I get very sick for a prolonged period then I'd struggle to pay the mortgage but I guess ill health retirement pension would be relevant, although I don't know how much it would be. I could also sell and move to a cheaper flat further out.

I'm inclined to think these different insurances and covers aren't that important to me because I don't have dependents but I'm not sure if I'm missing something. Thoughts and advice would be much appreciated

csgohan4

Shop around and don't be limited to your mortgage broker for life and critical illness insurance.


Income protection is a must and I would rank critical illness last but take it if you can afford it.


The younger you are the cheaper these insurance products will be. If you decide to take them on later on, you will find it more expensive and you may have had some health issues which may make you uninsurable.

Weighty1

Friday1989 wrote: »

I'm inclined to think these different insurances and covers aren't that important to me because I don't have dependents but I'm not sure if I'm missing something. Thoughts and advice would be much appreciated

Income protection *should* be very important to you. Being able to claim early on your pension is very much dependent on any disability and is decided upon by the trustees, whose primary aim is to protect the pension scheme funds. You should not expect to be able to claim early retirement for anything but the most permanently and severely disabling conditions. Musculo-skeletal problems, mental health conditions and cancer are typically the 3 most common reasons for the claiming on income protection plans and across the market average claims normally last in excess of 4-years. On that basis, just consider how your life would be affected if you were unable to work for longer than 4-years.....

Andy7856

My thoughts, forget life cover, if you have no dependent why would you want to pay into a policy you wont benefit from. If you get married then review again, dont automatically take out! as once again it may not benefit you/partner.

Income protection could be considered, but check with your employer to see what sickpay you get first! For example if you get 6 months full pay/6 months half pay, and you can afford you bills on half pay then have the income protection start after 12 months of illness as this will reduce the premiums.

Think the key thing is to review what your already in place, then review again as life event come along.

Dont forget the broker will be after his sales targets, so you can always take the mortgage from them, and shop around for the life policies (as the other poster suggests)

BooJewels

Andy7856 wrote: »

Think the key thing is to review what your already in place, then review again as life event come along.

I have some concerns over that concept - if your circumstances change, so might well your health - and may make it more difficult to get cover in future.

Income protection and critical illness cover lock in your heath status on the day you take cover and if you're young and healthy when you do so, it will be cheaper and locked in for the life of the cover. For example, if you develop something reasonably innocuous like slightly elevated blood pressure and your GP prescribes a low dose hypertension med, this might make it harder to get certain medical conditions covered. Also be mindful of habits like smoking and if you've ever discussed alcohol consumption with your GP - these questions are asked on forms.

The market has changed since we took our mortgage products, but we took critical illness cover a good number of years ago (and like many forms of insurance, you hope it's a waste of money) and this is the only reason I still have a roof over my head and the heating on. My husband developed a qualifying and life-limiting health issue and we were paid out (it took some weeks and was a nerve wracking time, as it wasn't straightforward) enough to pay off the remaining mortgage and give us a lump sum. We took the option at the time to cover the amount we borrowed, not a decreasing sum (which is cheaper cover) and it has made a huge difference to our lives.

Income protection would be better, but I don't think it was an option at the time.

As Weighty1 suggested, how would you survive with no income and no partner to share the bills with, if you have to give up working? As my husband has taken a further health hit recently and lost the modest part time job he now had, we're now seriously wishing we'd taken even better cover, as he may not be able to work any more in future and these are scary scenarios.

Even if you lived fairly modestly, it could cost three quarters of a million to live the rest of your life if you couldn't work. If you're young and healthy now, please try and imagine a worst case scenario and plan for that. Take out the best cover you can afford and I hope you waste your money!

Friday1989

Thanks everyone. It's interesting to hear different people's perspectives. I think income protection sounds sensible but although I'm young, I'm not healthy so not sure how much or how good the cover will be. I'm guessing you can exempt conditions? If I can't I have no chance (serious mental illness, history of alcohol dependence, although I do just drink socially now). If they look at family history I'm in an even worse situation (cancer in a first degree relative at a young age, medium to high chance it's genetic).

I guess I'll have to do lots of googling, listen to what the broker says then shop around.

It's funny how I didn't know about income protection before thinking about getting a mortgage. Is it something most people know about?

Marvel1

Living on my own, i only have building and contents.

Life insurance - it's only me, no dependents.

Critical illness, income protection- not bothered as no doubt the small print will avoid a payout someway.

This is just me.

Weighty1

Friday1989 wrote: »

Thanks everyone. It's interesting to hear different people's perspectives. I think income protection sounds sensible but although I'm young, I'm not healthy so not sure how much or how good the cover will be. I'm guessing you can exempt conditions? If I can't I have no chance (serious mental illness, history of alcohol dependence, although I do just drink socially now). If they look at family history I'm in an even worse situation (cancer in a first degree relative at a young age, medium to high chance it's genetic).

I guess I'll have to do lots of googling, listen to what the broker says then shop around.

It's funny how I didn't know about income protection before thinking about getting a mortgage. Is it something most people know about?

Based on a past history of alcohol dependence and the fact that you do still consume alcohol, albeit socially, it could be extremely difficult to get cover. Certainly in the past insurers did not like those with either past alcohol addiction or dependency to drink at all, however, it is a certain number of years since I've had this scenario so things could be a little more lenient now. In addition to that, having a first degree relative with cancer at an early age *could* cause an exclusion or increase in the premiums, depending on the type of cancer. Typically, insurers will only penalise applicants for a family history of bowel, breast and ovarian. Depending on just how serious the history of mental health issues is could be the nail in the coffin for an income protection plan. They're not too concerned about depression, anxiety and stress and would just exclude these from a plan but when things like self-harm, suicide attempts or inpatient treatment arise then they become far more cautious in offering cover at all.