FTB which insurances/assurances needed

Hi, my son and his partner are buying their first home.  He is 29 and she is 30.  Their first child is expected in September.  The mortgage broker has advised Critical Illness Cover and Life Assurance Cover.  This will take a huge monthly chunk from their monthly budget.  I've just read up on Critical Illness and it only pays out once and just for one of them even though it would be a joint policy.  Is there any other insurance cover they need?  They have buildings and contents.  I hope I have posted this in the correct place..
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  • kingstreet
    kingstreet Posts: 38,595
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    Most of us prefer Income Protection to Critical Illness Cover. This replaces income in the event of inability to work due to accident or illness. Choose the best "own occupation" Permanent Health Insurance with benefit payable after work sick benefits end upto retirement.

    Independent protection advice should be sought.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • ACG
    ACG Posts: 23,603
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    I am with Kingstreet. Income protection pays out if unable to work due to accident or illness. Critical illness pays out if you get a list of conditions, there is no such stipulation with income protection. 

    The difference however is that one will pay a lump sum, the other pays monthly. 

    Personally, I have income protection and I have no intention of ever taking out critical illness. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • DullGreyGuy
    DullGreyGuy Posts: 8,935
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    Mirror the above but be aware there are two products (ASU and PHI to use their technical terms) sold under the banner of "income protection". The former is the budget product and better known as PPI. PHI is the better product and in its full fat version will payout your salary until your planned retirement date which could be near enough 40 years.

    PHI is expensive though, cheaper if you can defer payments for 6 months or longer, but a much stronger safety net than CI which may or may not respond depending on if your illness is on the list or not. 
  • ACG
    ACG Posts: 23,603
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    edited 2 February at 2:49PM
    Mirror the above but be aware there are two products (ASU and PHI to use their technical terms) sold under the banner of "income protection". The former is the budget product and better known as PPI. PHI is the better product and in its full fat version will payout your salary until your planned retirement date which could be near enough 40 years.

    PHI is expensive though, cheaper if you can defer payments for 6 months or longer, but a much stronger safety net than CI which may or may not respond depending on if your illness is on the list or not. 
    Just to expand on this...
    You do not need to cover your full income. 
    As an example, when my daughter was born, I took out a little policy for £500 a month. At the time £500 would have paid more or less my mortgage (£300, council tax £120 and gas/electric bill £90), my income was about £1,500 a month.... That costs me about £8 a month as I took it out when I was 30 and still quite young. 

    Now £500 does not even cover my mortgage, so I have taken out a top up - still not enough to cover everything but enough whereby I could get by if I had to give up work without having to rely on state benefits. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • grumbler
    grumbler Posts: 58,591
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    edited 3 February at 5:28PM
    fifi35 said:
    Hi, my son and his partner are buying their first home.  He is 29 and she is 30.  Their first child is expected in September.  The mortgage broker has advised Critical Illness Cover and Life Assurance Cover.  This will take a huge monthly chunk from their monthly budget.  I've just read up on Critical Illness and it only pays out once and just for one of them even though it would be a joint policy.  Is there any other insurance cover they need?  They have buildings and contents.  I hope I have posted this in the correct place..
    Define 'need'/'needed'.
    IMO, it's a common misconception that some insurance is needed after you buy a house.
    Generally, in terms of life/income insurance, there is no essential difference between renting a house and owning it with a mortgage. In both cases, without insurance, if you lose income you become homeless. And, if you own a house and it's repossessed, you don't lose the equity (= your savings).
    There can be other considerations, but nothing essential.
    Call me a cynic, but I think mortgage advisers are so keen on advising insurances because of big commissions that insurance companies pay for every referred customer.

    The point is - if your son has been renting and didn't need any life/income insurance, then no insurance is really needed after he buys a house.
    We are born naked, wet and hungry...Then things get worse. :(

    .withdrawal, NOT withdrawel ..bear with me, NOT bare with me
    .definitely, NOT definately ......separate, NOT seperate
    should have, NOT should of
    .....guaranteed, NOT guarenteed
  • dunstonh
    dunstonh Posts: 115,612
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     I've just read up on Critical Illness and it only pays out once and just for one of them even though it would be a joint policy.  
    Which is all that is needed as you have just one mortgage.   
    You can get more paid out or split  per person but there is usually no point when covering a mortgage.

     Is there any other insurance cover they need?
    I'm another that puts income protection (PHI type, not PPI) ahead of CIC.



    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • ACG
    ACG Posts: 23,603
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    grumbler said:
    fifi35 said:
    Hi, my son and his partner are buying their first home.  He is 29 and she is 30.  Their first child is expected in September.  The mortgage broker has advised Critical Illness Cover and Life Assurance Cover.  This will take a huge monthly chunk from their monthly budget.  I've just read up on Critical Illness and it only pays out once and just for one of them even though it would be a joint policy.  Is there any other insurance cover they need?  They have buildings and contents.  I hope I have posted this in the correct place..
    Define 'need'/'needed'.
    IMO, it's a common misconception that any insurance is needed after you buy a house.
    Generally, in terms of life/income insurance, there is no essential difference between renting a house and owning it with a mortgage. In both cases, without insurance, if you lose income you become homeless. And, if you own a house and it's repossessed, you don't lose the equity (= your savings).
    There can be other considerations, but nothing essential.
    Call me a cynic, but I think mortgage advisors are so keen on advising insurances because of big commissions that insurance companies pay for every referred customer.
    Cynic! 
    I take my commission on the drip, it works out at maybe a couple of quid a month for a few years and then pennies for the remainder. They do add up and its nice to start the month with a little bit of residual income, but I think the only bill it pays is my TV license  :D

    Its a tricky one, because yes obviously we earn on the back of anything we put in place. I really hate sounding like a dodgy insurance salesman - when I see the things some brokers say and do it makes me cringe a bit. But ultimately trying to sell a product that is probably needed is probably not such a bad thing. 

    Not something I would say to a client (because of the cringe factor) but cancer will affect over 50% of us, 1 in 4 people being affected by mental health and around 17% suffering from bad back/joints - its quite possible you may need to take some time off work. 

    Not all of those things will require everyone to take time off work, some may only affect people after retirement etc. But the average claim period on income protection is around 6-8 years... 

    You just sort of think for maybe £20-30 a month you could have an income which could help to pay a mortgage and some bills. You really cant rely on state benefits and I cant see them getting any better or easier to claim in the future. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • grumbler
    grumbler Posts: 58,591
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    edited 2 February at 7:28PM
    ACG said:
    grumbler said:
    fifi35 said:
    Hi, my son and his partner are buying their first home.  He is 29 and she is 30.  Their first child is expected in September.  The mortgage broker has advised Critical Illness Cover and Life Assurance Cover.  This will take a huge monthly chunk from their monthly budget.  I've just read up on Critical Illness and it only pays out once and just for one of them even though it would be a joint policy.  Is there any other insurance cover they need?  They have buildings and contents.  I hope I have posted this in the correct place..
    Define 'need'/'needed'.
    IMO, it's a common misconception that any insurance is needed after you buy a house.
    Generally, in terms of life/income insurance, there is no essential difference between renting a house and owning it with a mortgage. In both cases, without insurance, if you lose income you become homeless. And, if you own a house and it's repossessed, you don't lose the equity (= your savings).
    There can be other considerations, but nothing essential.
    Call me a cynic, but I think mortgage advisors are so keen on advising insurances because of big commissions that insurance companies pay for every referred customer.
    Cynic! 
    I take my commission on the drip, it works out at maybe a couple of quid a month for a few years and then pennies for the remainder. They do add up and its nice to start the month with a little bit of residual income, but I think the only bill it pays is my TV license  :D


    I think more in terms of the total amount - insurance companies offer up to £1.6K (!) cashback through TCB (depending on the monthly premium; this figure is for £250+). Essentially they offer you 7 months for free just to lure you. But I remember making easy £200ish simply by purchasing a policy and cancelling it after few qualifying months.
    Its a tricky one, because yes obviously we earn on the back of anything we put in place. I really hate sounding like a dodgy insurance salesman - when I see the things some brokers say and do it makes me cringe a bit. But ultimately trying to sell a product that is probably needed is probably not such a bad thing. 

    Not something I would say to a client (because of the cringe factor) but cancer will affect over 50% of us, 1 in 4 people being affected by mental health and around 17% suffering from bad back/joints - its quite possible you may need to take some time off work. 

    Not all of those things will require everyone to take time off work, some may only affect people after retirement etc. But the average claim period on income protection is around 6-8 years... 

    You just sort of think for maybe £20-30 a month you could have an income which could help to pay a mortgage and some bills. You really cant rely on state benefits and I cant see them getting any better or easier to claim in the future.
    I agree, but my point stands - the decision whether to have this sort of insurance on not has very little to do with getting a mortgage.

    We are born naked, wet and hungry...Then things get worse. :(

    .withdrawal, NOT withdrawel ..bear with me, NOT bare with me
    .definitely, NOT definately ......separate, NOT seperate
    should have, NOT should of
    .....guaranteed, NOT guarenteed
  • ACG
    ACG Posts: 23,603
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    grumbler said:
    I agree, but my point stands - the decision whether to have this sort of insurance on not has very little to do with getting a mortgage.

    Oh 100%. But most people do not think about it until either it is too late or they are prompted. A house purchase is a good time for a prompt.

    Personally, I take the view that I cover it off. If you know about it and want it, great. If you know about it and do not want it, thats fine also. But if you do not know about it and would have had it, that is not so great. 



    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • fifi35
    fifi35 Posts: 228
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    Ok thank you for all the replies.   So, I'm getting that Income Protection (PHI)  is probably the way to go.  Would you also recommend Term Assurance?  I think the reason he is looking at it is because his first child is to be born later this year and he wants to protect himself or partner in case one of them can't work or dies.
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