Confused over life assurance and HSU policies

giger

I've been reading the various topics on here for a while and thought I had a grasp of what I wanted but I am not so sure that I do.

I like the idea of level term assurance and have worked out a premium based upon 10x my salary (as recommended by Martin). This would cover the mortgage and leave a nest egg which I like the idea of. This also comes with a terminal illness policy but I have read these are sometimes not worth the paper they are written on. My savings are not huge but good enough to cover any bill payments for over a year, but also like the idea of a critical illness cover, again just in case the worst should happen.

What type of policy do I need to get to that might actually pay ou in event event either of us are diagnosed with a critical illness? Is it at all likely that level term assurance will pay out (Cavendish for example) or should I look at a specific type of policy? If I can factor in unemployment cover for peace of mind that that would also be good.

TIA

roguebrogue

Level term assurance alone would not pay out on critical illness.

giger

The Life assurance that I have looked at through Cavendish comes with terminal illness cover. However this seems to be quite restrictive in what it covers.

poppy_f1

most companies give terminal illness cover foc on life assurance

critical illness is a different type of cover than can be taken alongside life cover or taken standalone

dunstonh

A very common error by those going DIY is to think that terminal illness and critical illness are the same thing. We have seen posters say they are saving loads of money and it turns out the reason they are saving loads is that they have dropped CI without realising. A bit similar to house insurance in the past where people dropped accidental and/or personal possessions cover and went with standard without realising.

I like the idea of level term assurance and have worked out a premium based upon 10x my salary (as recommended by Martin).

Whilst Martin suggests that in his article it is not a recommendation. He is not authorised by the FSA to give advice. The old 10x salary comment is what tied insurance reps used to use and for many people it will lead to over insurance. Whilst its better to have more instead of less you have to be aware that the monthly premiums are likely to be higher than a proper analysis done by an IFA. So, you may think you are saving but in reality you are not.

This would cover the mortgage and leave a nest egg which I like the idea of.

Its not very efficient though. You should have at least two policies. One to cover the mortgage which would typically be a decreasing term assurance and one for family protection. If the family needs are different with spouse/partner then you may end up having two or three more chunks with different expiry dates and sum assured to suit the needs in question.

This also comes with a terminal illness policy but I have read these are sometimes not worth the paper they are written on.

Whoever says CI isnt worth it doesnt have a clue. It has a higher successful claims rate than PPI and statistically you have odds of around 1 in 6 of suffering a claimable event before retirement. Its just behind life cover in terms of stats which is 1 in 5. Although a PHI policy is often the better choice before CI if you are on a limited budget.