Life & Critical Illness Insurance without Dependents??

EC3D

Hi all,
I'm a FTB in the process of buying a flat. I have been unsure about whether to get life & critical illness insurance, as I'm buying the flat by myself and have no dependents. Obviously no one wants to think about death or terminal illnesses (especially as I'm only just about to be 30) However I assume if I were to die the flat would go to my parents, and they wouldn't be able to afford the mortgage, or if there was a chance I got a terminal illness (touch wood) then the insurance would just pay off the mortgage and I wouldn't have to worry.
So my bank is trying to sell me their insurance (which seems expensive) and I've been looking at quotes and getting phone calls from them as well. But I also hear from a few of my homeowner friends that there's no point if you're single and have no dependents. I'm probably overthinking this but I just feel unsure because of course it's an extra monthly expense on top of everything else.
Also is decreasing cover better then level cover??

Thanks in advance.

Sandtree

The best advise of all is to speak to a whole of market protection insurance broker.

Life pays you, normally, on your death or terminal illness diagnosis with less than 12 months prognosis.

Critical Illness pays you if you get one of a set list of illnesses (or occasionally injury) at a certain level (which is well below terminal in most cases).

So if you are single, will always be single, will never have any dependants etc then critical illness is worth considering as it means in theory if you get ill you can pay off your mortgage and potentially go part time or take a less stressful job etc after your major heart attack rather than having to rush back to work or risk losing your home.

Life in that scenario is fairly irrelevant however the cost of adding life cover to a CI policy is peanuts and so maybe worth doing just in case life changes.

Obviously if you have life plans involving partners, kids etc then it becomes a harder decision as buying now when you are young fit and healthy can be much cheaper (even in the long run) than waiting until you've had your first heart attack.

For a single person there is another class you havent mentioned which personally is much more important which is income protection. You may get something from work as standard but CI only pays if you have certain conditions, there are plenty of others that could make you unable to do your job for several years potentially which arent on the list and so CI doesnt pay. 

Decreasing -v- Level again depends on plans... some have both, decreasing that will cover the mortgage and you dont "over pay" because the cost per month is lower and then a second level term policy or section which will provide a for your widow(er)/kids for the next 15 years after you snuff it.

lisyloo

Life insurance - if you have little equity (and little pension) then you don't need it. Just let the bank take back the house.

Critical illness - personally I don't like it. It's a limited list of illnesses (so you could get something else like a "bad back" that isn't covered) also for a young person the lump sum may not be enough for life. It's more suitable for treatment, bucket list, house adaptations. Permanent health insurance is more suitable that pays an income until retirement if you can't work (income and can't work and 2 significant differences with critical illness).

Check what your insurer offers, some do PHI (mine does) for free.

It's valid to skip this at your age as long as you understand the risk i.e. if your really unlucky and get long term ill then you'll lose the home and have to live with your parents who would have to take care of you. Is that an acceptable risk to you?

Personally I think it's ok to skip it until you "settle down", but you need to understand the risks you are taking.

Aretnap

EC3D said:

However I assume if I were to die the flat would go to my parents, and they wouldn't be able to afford the mortgage,

Would it matter? Do your parents particularly need a flat? Probably they would sell the flat and assuming that you were not in negative equity there would be some cash left over for them once the mortgage had been paid off. Do you feel the need to pay extra for life insurance in order to make that potential pile of cash bigger?

(If you were in negative equity then of course there would be nothing left over for them, however they would not be left with a bill to pay - your debt cannot be inherited by anyone else).

On the other hand critical illness cover would pay out while you were still alive so there is potentially a benefit to you from having it. And as above if you do get CI cover then the cost of adding life insurance to it is often pennies, or even zero, so it would likely be worth doing that if you think there's any chance that you might have dependants in future.

However I would also agree that income protection should take priority over critical illness cover. To give just one reason why, some of the biggest reasons people are unable to work long term are not "dramatic" "critical" illnesses like heart attacks and cancer, but "mundane" things like muscoloskeletal disorders (arthritis, back pain etc) and mental health issues (stress, anxiety, depression etc). Neither of those would get you a penny from a critical illness policy, but an income protection policy would pay out a large portion of your monthly income for as long as you were unable to work - potentially for many years.

Your bank will push you hard to buy their products (obviously), however buying insurance through a bank tends to be quite expensive and you could very likely find better cover for less money on the open market. Speaking to a whole of market broker or an IFA is probably the way to go.

mgfvvc

EC3D said:

I have been unsure about whether to get life & critical illness insurance

Is life assurance a condition of your mortgage? If not then you don't "need" it. If your parents would inherit then a small policy to cover any negative equity, legal fees, etc. might be worthwhile anyway.

EC3D said:

Also is decreasing cover better then level cover??

That very much depends. If you are covering the whole mortgage amount and the decreasing cover is significantly cheaper than the level cover, then it may be better. If the prices aren't that much different then level cover is better because it will pay out more unless you die early in the term. If you are just insuring for a smaller lump sum to cover possible negative equity and legal fees then you probably want level cover.

IAMIAM

I bought both through money world, much cheaper. I am in the same circumstances as yourself.
Life with CIC for 200k was £312 per annum when I bought it and currently still have, ends age 70 at fixed premium.
Income Protection was £350 per annum for £3k per month until age 65, fixed premium.
Both legal and general and both worth their money in my opinion. I pay £650 a year for piece of mind and if I need to claim the income protection, 6 months of payout covers the entire cost of the policy until age 65. 
WORTH IT!!! 

Weighty1

If you fell long term ill and were unable to work how are you going to pay your mortgage.........the council tax............the gas and electric.................the water................for food..............broadband..................clothes...............etc etc etc.

Asking your homeowner friends if it's worth it is like asking someone who's never had a car accident if car insurance is worth it.  It never is UNTIL the point at which you need to claim and then it becomes the best purchase you would ever make.

Personally, I'd suggest looking at long-term income protection first as it's probably your income which underpins your standard of living and ability to pay for all the things above.  THEN, if you are happy spending more than what it costs for that look at critical illness cover.

davidmcn

EC3D said:

However I assume if I were to die the flat would go to my parents, and they wouldn't be able to afford the mortgage

They don't need to afford the mortgage. What would invariably happen in such a situation is the executors would sell the property to pay off your mortgage.