Life Insurance / Income Protection / Critical Illness

wishinghome

Hello

My husband and I are about to buy our first home. We have 2 young children, he works FT and I am PT. We are confused about what level of cover we need to get. Husband gets death in service and 12 months full sick pay. My income is negligible and we can live on just his income. We're thinking income protection would not be necessary but I'm not sure if we're being naive! Currently we're thinking we would get critical illness and life insurance to cover the life of the mortgage but I'm after opinions if possible please?! What are the main things we need to consider when choosing a policy? My husband will be contacting a group insurance through his employer for a quote but we want to have some idea of what our needs are first.

Many thanks 

Sandtree

You can get a Permenent Health Insurance policy with a 12 month deferment so that it kicks in when his sick pay ends which will bring down premiums considerably.

CI I am not a fan of personally but clearly there are those that have claimed on it and think its amazing. If you buy it just be sure you understand it and particularly what can be its issue in 10 years time etc after medical advances happen.

Life is clearly an important one too... the mortgage however is only one consideration here... what are your financial plans if he goes under the bus tomorrow? Could you live on your income only if the mortgage was cleared or do you need more monies?

wishinghome

Thank you that's really helpful. We're finding this a bit of a minefield! We'll definitely look into the permanent health insurance with the deferment. In terms of life insurance, I'm currently PT but will be going back to FT in a few years once the children are a bit older. My FT salary would cover all other expenses if the mortgage was taken care of but not my current PT salary so that's something to think about thank you.

tacpot12

Death-in-service benefit is useful, but is tied to your husband's job. If he loses his job, and then dies you would be left with no life insurance unless you take out a separate policy. I would insure both your lives while you are both young, fit and healthy as this is the cheapest time to take out life insurance. I would strongly recommend level term life insurance as being the best value. Decreasing Term insurance is a little cheaper, but only covers the mortgage not the whole family. Permanent Health Insurance is also a must. Defer the payments for 12 months as per Sandtree's suggestion. 

wishinghome

Thank you. My husband is a police officer so there's no chance of redundancy or anything like that but nothing in life is guaranteed so I take your point on board. So I think we're looking at permanent health insurance with deferred payments for 12 months plus level term life insurance for both of us as a minimum and take it from there.

Thank you both, you've been really helpful.

dunstonh

Death in service is largely aimed to covering short term loss of income and reduced pension entitlement.   If you use the DIS to cover a mortgage then that would leave you short on retirement provision and short term loss of income.     

kingstreet

tacpot12 said:

Death-in-service benefit is useful, but is tied to your husband's job. If he loses his job, and then dies you would be left with no life insurance unless you take out a separate policy. I would insure both your lives while you are both young, fit and healthy as this is the cheapest time to take out life insurance. I would strongly recommend level term life insurance as being the best value. Decreasing Term insurance is a little cheaper, but only covers the mortgage not the whole family. Permanent Health Insurance is also a must. Defer the payments for 12 months as per Sandtree's suggestion. 

Family Income Benefit would offer better value and would more closely meet a family protection need than a lump sum.

wishinghome

dunstonh said:

Death in service is largely aimed to covering short term loss of income and reduced pension entitlement.   If you use the DIS to cover a mortgage then that would leave you short on retirement provision and short term loss of income.     

Thank you. That's useful to know. We will definitely look at getting a separate life insurance policy for him on top of his DIS.

wishinghome

kingstreet said: 

Family Income Benefit would offer better value and would more closely meet a family protection need than a lump sum.

Thank you. We'll look in to that and think about what would work for us better in terms of life insurance; a lump sum or monthly payments. 

Weighty1

kingstreet said:

tacpot12 said:

Death-in-service benefit is useful, but is tied to your husband's job. If he loses his job, and then dies you would be left with no life insurance unless you take out a separate policy. I would insure both your lives while you are both young, fit and healthy as this is the cheapest time to take out life insurance. I would strongly recommend level term life insurance as being the best value. Decreasing Term insurance is a little cheaper, but only covers the mortgage not the whole family. Permanent Health Insurance is also a must. Defer the payments for 12 months as per Sandtree's suggestion. 

Family Income Benefit would offer better value and would more closely meet a family protection need than a lump sum.

Totally agree, especially since if death occurred in the early years a level term plan may only pay off the mortgage and leave little behind for family protection and if you bolster the level cover, you may as well have the decreasing cover as separate option anyway.

Weighty1

wishinghome said:

dunstonh said:

Death in service is largely aimed to covering short term loss of income and reduced pension entitlement.   If you use the DIS to cover a mortgage then that would leave you short on retirement provision and short term loss of income.     

Thank you. That's useful to know. We will definitely look at getting a separate life insurance policy for him on top of his DIS.

wishinghome said:

dunstonh said:

Death in service is largely aimed to covering short term loss of income and reduced pension entitlement.   If you use the DIS to cover a mortgage then that would leave you short on retirement provision and short term loss of income.     

Thank you. That's useful to know. We will definitely look at getting a separate life insurance policy for him on top of his DIS.

I'd definitely recommend disregarding the DIS.  The main reason being if your hubby was ever medically retired due to ill-health he loses his DIS and it could be impossible to replace due to the reason he has been retired.  Death in service is a free benefit so it's not like you are being charged twice for a product.