Life insurance and critical illness cover - how much is enough?!!

I don't think the IFA is necessarily wrong!

What if you suffered a critical illness which was permanently debilitating and meant you couldn't do your job again? Whilst £200-300-400,000 critical illness cover might sound like a lot, it's not if it's got to last throughout your working life.

Did the IFA not discuss long-term income protection? This would have been my go to solution as the amount it pays out is dependent on how long you are ill so it's naturally tailored to providing more cover for the most debilitating conditions PLUS it would almost certainly cost less than critical illness cover.

In regards to life insurance there are ways of maintaining a high level of cover but reducing the cost. If you work through your own limited company, and I expect you do with that level of income, you could look at a Relevant Life Policy. This is were the business owns the plan and the premiums are generally classed as a trading expense but the money pays into trust, with no deductions, in the event of a claim. This is extremely tax efficient compared to a personal plan which is paid out of post taxed income. Alternatively, you could look at something like Family Income Benefit. Instead of paying out a lump sum, this provides a regular income from the point of death until a set point in the future. This generally works out far more cost-effective than a fixed lump sum arrangement since it is a reducing risk for the insurers and is therefore priced according to this.

Based on what you've written it sounds to me like the IFA has offered the easiest solution without necessarily providing some out of the box solutions which could be better placed to maximise your cover whilst minimising the cost.

IMHO the IFA recommendation is OTT in your circumstances, does he takes commission or flat fee?

Ultimately only you can establish how much is enough.

In my case (also self employed) we always have 6+ months of living expenses in savings. This by itself takes care of short term critical illnesses, so decided that £50k (which is another 12-18 months) CIC is enough. I work in IT and there aren't that many non-terminal illnesses that can prevent me from working. The Life insurance naturally to cover the hole mortgage and about 2 years of expenses extra. Then you will have some pension available to the surviving party as well.

At your level of incomes and with £200k mortgage either surviving party should be fine, by just being mortgage free. The 300k would be a nice bonus to carry through life disturbance/readjustments. £1.5 mil is excessive