CI and Life insurance - seperate or single policy

village_life

Hi

My wife and I have joint policies for both Critical Illness (£37 per month with Axa) and Life Insurance (£9.50 per month with Tesco), both of these policies are 25 year term policies to cover our mortgage.

We've done some review (Based mainly on Martin's views on CI policies and also horror stories of CI policies not paying out) and have found that we can get a consolidated Life and CI policy for £27 per month - so saving us around £18 per month (£216 per year, or £4698 over the remaining 23 years of our mortgage)

Having loosely discussed this with my wife, her view is that should one of us get a Critical Illness or die, then paying off the mortgage is the main requirement, therefore moving to this consolidated policy seems to fit the bill

My question is whether there is any significant benefit from keeping the 2 policies seperate (seperate Life and seperate CI insurance) that justify the additional cost

Thanks in advance

lisyloo

Slightly away from your question but have you looked at PHI?

CI pays a lump sum if you die from a small list of illnesses.
PHI pays an income until retirement if you can't work.

The first difference is the payment method. An income for decades is much more valuable than a lump sum if you are young.
The second difference is that one pays if you can't work, the other if you have the "right" illness.

Personally I think PHI is a MUCH better product and I don't rate CI at all.

So be aware that CI won't cover you if you have an accident that isn't an "illness" or you don't get the "right" illness.

village_life

Oh yeah I forgot to mention I have an ASU policy that covers us for £1250 per month for 1 year in the event I am sick, involved in an accident or made redudant..... we also have Bupa private medical cover

The ASU policy only covers me due to the way my wife is paid, and that my salary is mostly used for household bills.... £1250 per month would pay our core bills

That was the other reason we've reopend the whole isnurance coverage issue, as we're well covered with those 3 already, plus I get Death in Service benefit from work and decent terms from them if I am sick......

homer_j_3

Firstly, seek advice before replacing any policies.

The ABI brought CI policies more into line last year and because of this, the policies are more specific in what they actually cover. If you have a CI policy that is 4 or 5 years old it may be costing more but may pay out on more things.

If you have not been underwritten on the new quote, it may not be as cheap by the time you have been underwritten.

Most policies that fail to pay, do so because they are either incorrect for the claim or there has been non-disclosure of material facts. On this basis, I would be very wary of being swayed into changing cover because of a few horror stories. I can guarantee you that you wont see a "this policy saved us" story in the media because that would be a happy story.

For someone to be claiming they do not rate CI but prefer PHI is like me saying I like bananas but dislike grapefruits. They are different policies covering 2 different events as such and whilst I too believe PHI is great cover, so can CI.

My advice would be to get a professional to review your existing cover, look at what the budget you want to spend and see if they can make any suggestions to make your cover more comprehensive.

dunstonh

We've done some review (Based mainly on Martin's views on CI policies and also horror stories of CI policies not paying out)

A lot of us here have been very critical of Martin's views on this as we dont believe he is a) giving the correct information and b) doesnt realise that people think his comments are advice.

For example, Martin recommends ASU policies but they have a less successful rate of paying out (as well a lower odds of a claim) than CI. So why is CI bad but ASU not?

Over 80% of CI claims are paid out. Around 15% are not due to people claiming something that isnt covered (which is a bit like claiming on a household policy when you have a car accident) and 5% is due to non-disclosure.

The FOS have rules on non-disclosure for providers now so it really isnt an issue unless you rely on awful media coverage like BBC watchdog (last time round they totally misrepresented the FOS position and forced the FOS to issue a press release to give clarification).

When this subject has been raised before, the brokers and adviser have all commented that they are finding that more people are claiming successfully on CI policies than they are on life assurance. The age of claims appears to be getting younger too (I have had a 25 year old and a 31 year with successful CI claims).

The media always focuses on the negatives. Its what they do.

lisyloo

I have an ASU policy that covers us for £1250 per month for 1 year in the event I am sick, involved in an accident or made redudant

This covers you for 1 year so won't be any good if you off sick for life.
PHI covers you for until retirement when your pension would kick in.
It also only cover you and not your wife.

For someone to be claiming they do not rate CI but prefer PHI is like me saying I like bananas but dislike grapefruits.

The problem is a lot of people seem to think CI is a long term solution to not being able to work when sick and its isn't.

whilst I too believe PHI is great cover, so can CI

Can you tell about the good aspects of CI?
I see the downside of being both the limitation of cover with regard to illnesses and the limitation of using a lump sum to provide an income for any significant period.
I would welcome some education about the good aspects.

The media always focuses on the negatives. Its what they do.

So let's hear some positives.
It won't provide me with an income, so what will is it useful for?
If the answer is home modifications, private treatent, private care etc. then I'd rather self-insure and pay out on 100% of claims.

homer_j_3

CI pays a lump sum if you die from a small list of illnesses.

Well CI cover is there to provide a lump sum on diagnosis and survival of a specified critical illness - not death as that is what life cover is for.

CI cover is there to provide you with a lump sum of money to do with as you see fit - pay off mortgage, pay for alterations to the house or invest to provide as an income or a mixture. Ideally you will get this cover in excess of your mortgage amount if it affordable to pay mortgage and provide a contingency anount for medical cover or home alterations.

PHI pays an income until retirement if you can't work.

Whilst this is quite true, the fact remains that you have to provide full disclosure to the provider and there are occassions where it will not pay out. Some occupations may not be insurable either so this is not always fit for everybody.

An income for decades is much more valuable than a lump sum if you are young.
The second difference is that one pays if you can't work, the other if you have the "right" illness.

That is quite true but PHI is limited to a % of the earned income so you will never truely replace the full income and CI is not designed to replace income, its designed to pay a lump sum.

There is Family income benefit that can be used to replace income should 1 person die. This is another piece of cover worth having.

Personally I think PHI is a MUCH better product and I don't rate CI at all.

You have demonstrated that you do not fully understand the cover so I am not surprised by this and this is what Dunston was saying, people get their information from the media and Journo's, which is not the way to try and understand these policies as they are often misleading or written in a manner where clear bias is shown.

The problem is a lot of people seem to think CI is a long term solution to not being able to work when sick and its isn't.

They are clearly different products and as a professional, I take into consideration the fact that a non-expert in this field may have the wrong understanding. I also do not make recommendations without fully understanding what their needs are, their exact circumstances are and also what the existng polices do or do not cover.

I would welcome some education about the good aspects.

The education you need is not about the good aspects of a policy. It is about understanding clearly what each policy is designed to do and more importantly, what its NOT designed to do. The provision of protection is important and often many people cannot afford the full suite of policies that provide full quality protection and the phrase, some is better than none comes to mind. My job as a professional would be to provide the cost of full cover, discuss budget to see if it is affordable, if not, then to start prioritising.

The education that you need to do this, cannot be given over a post on a forum.

Please do not take my post as trying to belittle you or anything because I am not, I am just trying to ensure that the OP does seek professional advice before cancelling, changing policies which may be detrimental in the future.