Cheery thread! Can we talk about life insurance/critical illness/income protection cover?

[BrainInAJar]

Hello all,

Just reading up on this stuff and interested in what policy/policies (if any) you have?

My situation: 40, single, no children. Good health. 5 years to run on mortgage. I have some savings for an emergency (10k) but am way behind on retirement saving so if I was disabled/very ill, I'd be relying on benefits very soon.

I've been playing around with Compare the Market but I've no idea how much cover to go for especially for the lump sum for critical illness.

All thoughts and discussion helpful!

Thanks

Also I should say I'm not terribly worried about job security.

The Meaningful Money handbook says you would want money for things like wheelchairs or adaptations to your home. I mean how do you know how much this would cost?

Also it's a desk job I do so I'd need to be very ill before I was too ill to work if you see what I mean. As opposed to a physical job.

Being brutal, critical illness cover might be more likely to be called up than life insurance. If you die, single with no dependents, no-one else on the mortgage ... what do you need life insurance for? Traditionally it was to pay off the mortgage / provide a lump sum for the remaining parent, to cover for reduced household income.
Caveat - your mortgage provider may well have specific requirements.
Income protection - in the event of redundancy may be something else to add in to the mix.

I'd speak to a financial adviser and throw everything into that mix - if your mortgage was paid off, do your (future) savings cover other bills in the event of loss of income. Are you better "saving" versus paying off mortgage early / paying into pension etc etc

I have an old life insurance & Critical illness cover combined policy, which Ive had since my first mortgage, which my advisers tell me is "very good" relative to the price I pay & what is comparable on the market today. My personal circumstances have been similar to yours at times.

Thanks, @rwc2023 yes, I had thought I didn't need life insurance as I have no partner or dependents but the Meaningful Money handbook says it can take a year for probate to pay out so something has to cover the mortgage payments in the meantime?

So all the updates would mean I'd be more likely to suggest a financial adviser to review the whole position.

Re the job, as an example, you need to remember when considering needing to call on such policies that "risk" is a combination of "severity" and "likelihood". So, yes there's logic to thinking that a desk-job is easier to continue with where there's only a minor reduction in your health - but that doesn't consider the risk of something major happening tomorrow.

I took out critical illness cover 23.5 years ago with my first mortgage for the full amount of the mortgage (90k) and promptly forgot about it. 23.5 years later as a fit, slim and healthy (or so I thought!) 47 yr old I had a heart attack severe enough for my long-forgotten policy to pay out in full. Whilst I was very happy to remember I had the policy and receive the money, it would have been great if I’d upped the policy to cover my current mortgage. I’m self employed, and actually had less than a week off work but it could have been very different. So I’d advise setting it to a decent amount and keeping on top of it to reflect changing conditions, like remortgaging in the future!

Thanks @Daffodilapidated sorry to hear about your health and hope you are better now! So unlucky and yet lucky you had the policy!

I have a husband and DD and I’m the breadwinner, but without the mortgage we could live on DH’s income. So I have life and critical illness insurance to cover the mortgage and give us a lump sum equivalent to a year of my salary. If DD were in private school I would have quite a bit more cover to make sure we didn’t have to pull her out of school in already-stressful circumstances. It does all depend on your situation and financial commitments.

Generally, not offering financial or legal advice here, your "estate" would pay the mortgage until everything is settled. That situation will be different for different people & their ownership / mortgage / will arrangements - hence check whether you should have this cover in place already.

Thanks again @rwc2023 yes, there's enough money in my (defined contrib) pension pot to clear the mortgage. Presumably someone just phones the lender, reports my death and then they freeze the monthly payments until the estate can pay it?

I'm also interested in the cost of premiums if anyone's happy to give an idea?

I seem to be able to get 2k/month for only £12/m but a 250k lumpsum would cost me £80/m

I think I will indeed speak to an adviser but good to get ideas from you all.