Critical Illness Cover - Is it worth it?

fimalone · 29 January 2012 at 11:09PM

Hi

We just took out a mortgage with HSBC and they have said that we may benefit from critical illness cover that would payout to cover our mortgage if we had a major illness cancer heart attack - Are these inusrance worth it as they seem to have so many small prints that I am not sure. It would cost us £150 a month to cover both of us which seems like a lot if they don't pay out?

Any guidance appreciated.

Thanks

Fi

ACG · 29 January 2012 at 11:15PM

What would you do if one of you had a stroke/cancer/heart attack? Would you be able to take the hit in reduced income?
If not then arguably there is a need for it. It pays out in around 90% of claims so it has good statistics behind it.

Personally i prefer to sell Income Protection and when i explain the difference to my clients they tend to agree - but thats more of a case if its one or the other. Theyre not alternatives.

Deru · 29 January 2012 at 11:46PM

It is needed but I don't think getting it from HSBC is the way to go. Would probably be able to get it for less through an IFA. The long term cost of the cover may be low enough to cover the cost of using the IFA.

These tend to be cheaper if you're younger, healthy, don't have bad habits like smoke. Cost also determined by the level of cover needed.

dunstonh · 30 January 2012 at 2:42AM

Are these inusrance worth it as they seem to have so many small prints that I am not sure.

If you suffer a claimable event yes. If you dont then no. Are you going to suffer a critical illness or not?

It would cost us £150 a month to cover both of us which seems like a lot if they don't pay out?

How much will it cost you if you suffer a claimable event but dont have the insurance?

You can cut your cost and possibly get a better quality product by using an IFA and not an HSBC sales rep. Banks are typically upto 40% more expensive than an IFA arranged product.

The reason CI is more expensive than say life assurance is that it is more likely to pay out. Ideally, it is something someone in their 20s should aim to take out whilst its still cheap. Once you get into your 30s it starts to get expensive if you dont already have it as you are starting to enter the period when you are most likely to claim.

steve1980 · 30 January 2012 at 5:49AM

The problem with Critical Illness is that you have to have a qualifying illness.

If you have a mild heart attack, they won't pay out. If you have a mini stroke most will not pay out.

£150.00 is alot, check out comparison websites which will be a lot cheaper.

opinions4u · 30 January 2012 at 7:58AM

steve1980 wrote: »

The problem with Critical Illness is that you have to have a qualifying illness.

The problem with life assurance is that they won't pay out unless you die.

The problem with car insurance is that it doesn't pay out unless your car is damaged (or damages somebody else's property).

If you have a mild heart attack, they won't pay out. If you have a mini stroke most will not pay out.

While I agree that the definition of "mild" is important, think about what you are trying to protect. A minor event where you're back at work within a couple of months or a life changing event that could cost you your income and ultimately your home?

£150.00 is alot, check out comparison websites which will be a lot cheaper.

While I agree that people should shop around, we don't know that £150 is a lot. How much does it cover? What does it cover? Where is the line between "mild" and "insurable" when it comes to the conditions you mention above?

Nine_Lives · 30 January 2012 at 12:28PM

One insurance is like any insurance - it's only worth it if you need to call on it. If you don't then it was a waste, if you do you'll be glad you took it out.

Question is - do you want to risk not taking it out?

kingstreet · 30 January 2012 at 12:38PM

Definitions are getting clearer than they were a few years ago. Opinions like "mild" or "severe" are now less widespread, with the results of set tests being used more often to determine settlement of a claim.

The current widely-used definition for a heart attack is now

Heart attack
Death of heart muscle, due to inadequate blood supply, that has resulted in all of the following evidence of acute myocardial infarction:
• new characteristic electrocardiographic changes
• the characteristic rise of cardiac enzymes or Troponins recorded
at the following levels or higher;
• Troponin T > 1.0 ng/ml
• AccuTnI > 0.5 ng/ml or equivalent threshold with other Troponin I
methods
The evidence must show a definite acute myocardial infarction.
The following are not covered:
• angina
• other acute coronary syndromes.

In addressing what insurance an individual should consider, the individual first needs to weigh up the implications of certain events, then establish the financial need the event generates.

As ACG has said, income protection can be claimed for less severe illnesses preventing the policyholder from working and can provide sufficient income to enable continued mortgage and bill payments right up to retirement. It then becomes irrelevant if the mortgage lump sum is paid off as the payments remain affordable even during prolonged illness or disability.

lisyloo · 30 January 2012 at 1:45PM

Personally I prefere PHI - permanent health insurance for the following 2 mail reasons.

1) PHI pays if you cannot work (in some cases your specific job so if you are a solicitor you won't be expected to work on a supermarket checkout). The criteria of inability to work rather than specific illness makes a lot more sense to me as that's when you would need the money. With critical illness cover you could get a non-critical illness and be without income. There are loads of conditions like a "bad back" that are clinically not critical but can seriously hamper your well-being and ability to work.
I'd rather have a policy that works on my ability to earn an income.

2) Critical illness pays out a lump sum. Great for care, treatment, last holiday, altering your home, but no good for providing a long term income. I want an income preferrably until retirement if necessary.

I am not saying critical illness is no good or a direct alternative, but providing an income if you can't work seems like the first risk to cover to me.
Personally we both have PHI but do not have critical illness. That's not ideal but I don't know anyone who can afford or want to spend the money on the ideal level of insurance so it's always a trade-off and I believe even the professionals would agree with that to some extent.

Fortuna1 · 30 January 2012 at 2:04PM

fimalone wrote: »

Hi

We just took out a mortgage with HSBC and they have said that we may benefit from critical illness cover that would payout to cover our mortgage if we had a major illness cancer heart attack - Are these inusrance worth it as they seem to have so many small prints that I am not sure. It would cost us £150 a month to cover both of us which seems like a lot if they don't pay out?

Any guidance appreciated.

Thanks

Fi

We also took out Critical Illness cover back in 2002 with our Alliance and Leicester Mortgage - the policy was held by Legal and General.

My husband moaned like mad when I signed up for the Critical Illness cover, at nearly 200 quid a month he thought it was a total waste of money.

In 2008 my husband had a massive heart attack - fortunately he survived and returned to his normal work in just over 4 months.

When it payed out £156k which cleared our mortgage, he was relieved we'd taken the cover!

A policy like this is an 'insure against', pray you'll never need to claim on it. Peace of mind is worth £150 a month in my opinion.

dunstonh · 30 January 2012 at 2:18PM

My youngest claimant on a CI policy was 25. Breast cancer. I have had a few in their low 30s as well. I have been doing this nearly 20 years and have seen more CI claims paid out than any other.

Often, the most common time I get someone agreeing to take out CI policy is when they have seen what happens to a friend or family member.

Critical Illness Cover - Is it worth it?

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