Which protection insurance is most necessary?

Ybe

I already have 2 year income protection (pays 50% of salary for 2 years after 6 months off work then 3x salary final lump sum) from my employer along with life assurance (8x salary). 

My mortgage broker recommended I take lifetime income protection, life assurance and critical illness cover.  At £70 a month, I can’t justify paying that much on an insurance product I might never use. Over a year that’s nearly £1000 and over 30 years that’s £25000!  

kingstreet

I'd say IP until retirement is much better than limited benefit. Life cover if you have dependents. If not, is there a need?

Some critical illness cover to pay for adaptations or convalescence could be useful.

ACG

Im with Kingstreet, the average claim on a policy is between 6-8 years. 
2 years is a good start in addition to the lump sum and sick pay etc, but what happens after maybe 5 years? 

Life cover does not cost a lot so wont be making up much of that £70, the bulk will be on the CI cover. 

But some cover is better than none, so you can look at doing maybe a £20k CI payout rather than the full mortgage balance. Or instead of an income protection policy paying out 60-70% of your income until you retire you could maybe look at 50%. 

I put in place a policy for £500 a month years ago when my daughter was born, that was enough to pay our mortgage, utilities and council tax at the time. I then did a top up policy a few years later and probably need to do another top up again now with the cost of everything going up. 

grumbler

Ybe said:

My mortgage broker recommended I take lifetime income protection, life assurance and critical illness cover.  

It always surprises me when  people belive that life insurance (and/or similar) is needed when getting a mortgage. You either need/have it or not - regardless of renting a property or owning it with a mortgage.

housebuyer143

I mean you need to think, do you think if you lose your job you are going to struggle to find another? If the answer is no, then do you need income protection? Critical illness would be useful if you couldn't work and life insurance if you have dependants. 
You need to really look at your own circumstances and see what's most important and what you think you will need. I conversely have none, and choose to spend on private healthcare instead, but then I have enough money to clear my mortgage and would choose to downsize if something happened meaning I was unable to work.

Ybe

Thanks for all the answers, very useful. From what I understand, income protection is the most flexible though as it covers a wide variety of scenarios and covers you up to retirement? Critical illness seems to be very limited and if needed would be covered by income protection anyway?

Ybe

I wouldn’t struggle to get another job unless I’m crippled to the extent I can’t work from illness or accident. 

kingstreet

housebuyer143 said:

I mean you need to think, do you think if you lose your job you are going to struggle to find another? If the answer is no, then do you need income protection? Critical illness would be useful if you couldn't work and life insurance if you have dependants. 
You need to really look at your own circumstances and see what's most important and what you think you will need. I conversely have none, and choose to spend on private healthcare instead, but then I have enough money to clear my mortgage and would choose to downsize if something happened meaning I was unable to work.

In this context IP is disability cover, not unemployment insurance. Something to replace income in the event of a long-term disability due to accident or illness.

jimjames

Ybe said:

I wouldn’t struggle to get another job unless I’m crippled to the extent I can’t work from illness or accident. 

Also think about what cover is offered to you from your work, that might make it less risky not having insurance for some things. There's always a tendency to try to upsell all sort of policies which might cover every eventuality. If I'd have taken out critical illness cover I'd have had my mortgage paid off 20 years ago so I missed out but have carried on working and paid it off anyway.

Ybe

jimjames said:

Ybe said:

I wouldn’t struggle to get another job unless I’m crippled to the extent I can’t work from illness or accident. 

Also think about what cover is offered to you from your work, that might make it less risky not having insurance for some things. There's always a tendency to try to upsell all sort of policies which might cover every eventuality. If I'd have taken out critical illness cover I'd have had my mortgage paid off 20 years ago so I missed out but have carried on working and paid it off anyway.

Yes, I find it hard to believe that I need both income protection and critical illness cover. And it is up selling. I also noticed the £1500 commission to the broker on the quote. 

Ybe

ACG said:

Im with Kingstreet, the average claim on a policy is between 6-8 years. 
2 years is a good start in addition to the lump sum and sick pay etc, but what happens after maybe 5 years? 

Life cover does not cost a lot so wont be making up much of that £70, the bulk will be on the CI cover. 

But some cover is better than none, so you can look at doing maybe a £20k CI payout rather than the full mortgage balance. Or instead of an income protection policy paying out 60-70% of your income until you retire you could maybe look at 50%. 

I put in place a policy for £500 a month years ago when my daughter was born, that was enough to pay our mortgage, utilities and council tax at the time. I then did a top up policy a few years later and probably need to do another top up again now with the cost of everything going up. 

So the cover quoted to me was for 50k ci cover (with extra cover included for additional conditions), 13 weeks deferred income protection for 55% of my income with inflation linked increase and decreasing life assurance. The CI is about £25 and IP about £35. And the rest is life assurance.