Life insurance / critical illness insurance cover

Zerforax

For the past decade, I've always had life insurance / critical illness cover through work. From reading the MSE page and other forum threads, I understand that what I had before was:

Death in service is an employer-provided benefit. It's paid out as a lump sum if an employee dies while they are on the company payroll. This pay-out is typically four times your salary (but varies by employer).

Can I simply buy a similar type of product now? Just pay for something yearly for this cover. I don't think I want a level term insurance which is going to be a committed cost for a long period.

Will happily take any advice! Not sure where to start looking.

DullGreyGuy

What precisely do you want?

A third party won't do X times salary as they have no sight or control over your salary as time goes on, you can inflation link life benefits so at least it doesn't depreciate and your premiums increase by the same percentage. 

There is no long term commitment to CI/Life, if you stop paying your policy will simply cancel after 1 month. Obviously if you want to restart it then you need to apply again and being older prices are likely to be higher. 

Alternatively some ASU policies will payout on death so may be a consideration however be aware they are an annual policy so prices move (up) each year and the policy can be withdrawn at any time... plenty in covid found their prices going up 4-5x or simply not renewed so losing cover. With term insurance the insurer cannot just cancel it or adjust the price outside the agreed escalations and non-payment. 

Zerforax

DullGreyGuy said:

What precisely do you want?

A third party won't do X times salary as they have no sight or control over your salary as time goes on, you can inflation link life benefits so at least it doesn't depreciate and your premiums increase by the same percentage. 

There is no long term commitment to CI/Life, if you stop paying your policy will simply cancel after 1 month. Obviously if you want to restart it then you need to apply again and being older prices are likely to be higher. 

Alternatively some ASU policies will payout on death so may be a consideration however be aware they are an annual policy so prices move (up) each year and the policy can be withdrawn at any time... plenty in covid found their prices going up 4-5x or simply not renewed so losing cover. With term insurance the insurer cannot just cancel it or adjust the price outside the agreed escalations and non-payment. 

I'm not entirely surely! I guess as I'm most familiar with the "death in service" type life insurance, I was hoping for something similar.

Even if I can't get a multiple of salary, could I not just pick an amount (and I could pick something which is roughly a multiple of salary) as the sum to be paid out in the event of death?

I suppose I dont really feel the need to have term insurance as a future employer or my current job may start offering life insurance via work as a benefit. I think I'm just used to having most insurance policies for a yearly period!

DullGreyGuy

But you aren't locked into the full term, you can cancel at any point just the insurer can't. The advantage to you is that it gives you a fixed/predictable premium year on year. 

As mentioned, there were people with ASU, which is an annual policy, that were paying £50/month pre-covid and suddenly at renewal it becomes £250/month or they were simply told it wouldn't renew leaving them unprotected after a decade of paying in.

4x salary is usually far too little cover for a material earner with a family and is more of a helpful extra on top of the real insurance. 

Aretnap

Zerforax said:

DullGreyGuy said:

What precisely do you want?

A third party won't do X times salary as they have no sight or control over your salary as time goes on, you can inflation link life benefits so at least it doesn't depreciate and your premiums increase by the same percentage. 

There is no long term commitment to CI/Life, if you stop paying your policy will simply cancel after 1 month. Obviously if you want to restart it then you need to apply again and being older prices are likely to be higher. 

Alternatively some ASU policies will payout on death so may be a consideration however be aware they are an annual policy so prices move (up) each year and the policy can be withdrawn at any time... plenty in covid found their prices going up 4-5x or simply not renewed so losing cover. With term insurance the insurer cannot just cancel it or adjust the price outside the agreed escalations and non-payment. 

I'm not entirely surely! I guess as I'm most familiar with the "death in service" type life insurance, I was hoping for something similar.

Even if I can't get a multiple of salary, could I not just pick an amount (and I could pick something which is roughly a multiple of salary) as the sum to be paid out in the event of death?

I suppose I dont really feel the need to have term insurance as a future employer or my current job may start offering life insurance via work as a benefit. I think I'm just used to having most insurance policies for a yearly period!

Life insurance is very different to home or car insurance - by it's nature it's a long term policy. If you had a policy that only lasted one year and you were diagnosed with cancer, what do you think would happen at renewal time, just when you REALLY need your cover?

Whereas with a 30 year term policy nothing happens at renewal time - the insurer has committed to covering you for the full 30 years, regardless of changes to your health. There are no cancellations or premium increases if your health takes a turn for the worse. As above, you can still cancel yourself with a month's notice if you no longer need the policy.

For a similar reason I would not rely on death in service benefit as the duke protection for my family as you can lose it if you change job - and there is no guarantee that you will be in a position to get life insurance cheaply or at all in future. What happens if you develop a health issue that forces you to leave your job - and that same health issue prevents you getting life insurance when you subsequently apply for it?

dunstonh

 I think I'm just used to having most insurance policies for a yearly period!

Yearly renewable term assurance is cheap until you start getting into your 30s.  Then it goes up annually until it becomes unaffordable, leaving you with no insurance in the years you are more statistically likely to die.

Even if I can't get a multiple of salary, could I not just pick an amount (and I could pick something which is roughly a multiple of salary) as the sum to be paid out in the event of death?

4x salary wont be enough in most cases.  DIS is meant to give immediate support to the spouse and go some way towards lost pension entitlement.   10x to 20x is a more typical ballpark but that is a quick and dirty way to do it and not necessarily the best.

Zerforax

So if I'm in my mid-30s, what kind of ballpark premium are we looking at monthly/annually for a long term life insurance policy?

DullGreyGuy

Zerforax said:

So if I'm in my mid-30s, what kind of ballpark premium are we looking at monthly/annually for a long term life insurance policy?

why not stick your details into an online tool to get a ball park?

I dont like Critically Illness and so have Income Protection instead. For level term Life only cover with pre-existing conditions it was about £15 a month for £400,000 of relevant life cover when I took my policy out. Benefits and premiums are index linked so now they are about £23 however as relevant life its a touch more expensive than normal life insurance. 

A quick google puts a £400,000 policy for a 35 year old for 30 years at £18 a month with no medical conditions. Add critical illness takes it to £140.

Note life insurance is fairly generic, quality of CI cover varies much more. 

Weighty1

Zerforax said:

DullGreyGuy said:

What precisely do you want?

A third party won't do X times salary as they have no sight or control over your salary as time goes on, you can inflation link life benefits so at least it doesn't depreciate and your premiums increase by the same percentage. 

There is no long term commitment to CI/Life, if you stop paying your policy will simply cancel after 1 month. Obviously if you want to restart it then you need to apply again and being older prices are likely to be higher. 

Alternatively some ASU policies will payout on death so may be a consideration however be aware they are an annual policy so prices move (up) each year and the policy can be withdrawn at any time... plenty in covid found their prices going up 4-5x or simply not renewed so losing cover. With term insurance the insurer cannot just cancel it or adjust the price outside the agreed escalations and non-payment. 

I'm not entirely surely! I guess as I'm most familiar with the "death in service" type life insurance, I was hoping for something similar.

Even if I can't get a multiple of salary, could I not just pick an amount (and I could pick something which is roughly a multiple of salary) as the sum to be paid out in the event of death?

I suppose I dont really feel the need to have term insurance as a future employer or my current job may start offering life insurance via work as a benefit. I think I'm just used to having most insurance policies for a yearly period!

Here's a story for you:

A friend of mine was married and worked in a large government organisation which offered death-in-service.  She was diagnosed with bowel cancer and was off work for about 8-months.  She returned to work and after a few months was told the cancer had returned.  When  she went off the second time she was medically retired by her employer and upon her passing my friend therefore received NOTHING.

The point is, d-i-s can't always be relied on to be there when you need it.

That said, if you want cover then take out a plan over a relatively short term, say 3-years and then cancel as soon as you are in employment, presuming your employer offers similar cover.  

I'm not sure you'd get many advisers wanting to arrange this for you, as any commission paid (which is often pitiful on short term policies) would be clawed back as soon as the plan was cancelled AND as it generally wouldn't be seen as best practice but you could always do it on an execution only basis.