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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

Life insurance and critical illness

20 replies

tomatosoup1 · 05/08/2018 13:46

Not sure how much information to put here. Me And dh are in our late 20s.
We are looking at life insurance and critical illness cover but have no real idea how much we need.
Our mortgage is about £220,000
No dependents yet
Between us we earn £60,000 gross

I was thinking about £800,000 life insurance (decreasing in line with mortgage) and £250,000 critical illness.

Is this reasonable / too much / not enough?

OP posts:

Mrsjones17 · 05/08/2018 13:57

I am possibly being a bit thick here but why would you need nearly 4 times more than your mortgage life insurance?

I have life insurance and critical illness cover. Both cover the mortgage with about 10k left over. In terms of life insurance I think this is enough as it would mean my DH would not have mortgage to pay but what would the rest be for as I would be dead?! Not sure if my critical illness is enough if I had to stop working totally. It would pay off the mortgage and leave a bit left over but not sure if we could live like that for years on end. Having said that I do have a good health insurance policy through work so maybe that would be enough.

I have possibly been a bit thick about this as I have no idea either. I just felt that I needed to make sure I didn’t have any debts and the insurance policy covers them all.

VayKayShun · 05/08/2018 15:34

We were advised to take out the full amount to cover our mortgage. Also have no idea why you'd need nearly 4 times that amount

Violetroselily · 05/08/2018 15:37

See an IFA. They will be able to advise you on what products you require and how much cover you need

user139328237 · 05/08/2018 15:42

If anything critical illness should be higher than life in my opinion as you still have all of the costs of living when ill (but don't when dead) with no income.
As long as life insurance covers the mortgage, a funeral and a few months living costs (on the basis that an early death is likely to lead to the surviving partner needing a period of time away from work) on an ongoing basis presuming you are both working the surviving partners income should provide a reasonable quality of life in the medium to long term.

Apileofballyhoo · 05/08/2018 15:44

If you can afford it get as much as you like. I'd up the critical illness a bit though. Life assurance and critical illness should cover more than the mortgage and funeral - it should cover childcare costs for a single working parent or for that parent to go part- time/take unpaid leave to support partner and DC throughout illness or DC in the case of a loss. Also loss of future earnings. Just a few things off the top of my head!

Stupomax · 05/08/2018 16:02

I would take out enough life insurance to cover your mortgage if one of you dies, then each take out income protection that will give you enough to live on if you cannot work.

Once you have children, increase the life insurance so that there is a significant amount to leave them, if you both die (we took out term life that pays out £1,000,000 until our youngest DH is 21 I believe, but we did get a very good deal).

Sandstormbrewing · 05/08/2018 16:13

Can you afford that level of cover?

Original poster

tomatosoup1 · 05/08/2018 16:21

We can afford it but it seems a lot of money for something we hope we will never have to use.

OP posts:

Sandstormbrewing · 05/08/2018 16:27

For us, life & CI insurance to cover our full mortgage would be close to £100 a month, which is just too much. We decided on a cheaper option, which had the same illnesses covered to the same degree but only paid out a lump sum. This lump s stays the same throughout the plan and initially gives us somewhere in the region of 3 years mortgage payments, giving us time to downsize and make other financial plans as required.

PositivelyPERF · 05/08/2018 16:31

If you take four times your mortgage, the insurance company will question it. I think they’re worried that you’re already ill or about to get bumped off! 😁

Original poster

tomatosoup1 · 05/08/2018 16:36

This is why I'm not sure. I just thought it's worth getting that much as if my dh or I died it would be very difficult on the other, and therefore having a lump sum that big would mean not having to worry about bills and working at such a difficult time

OP posts:

notdaddycool · 05/08/2018 16:37

Our life insurance covers the mortgage plus an amount that will get through childcare in the early years. We then have a bit that’s just critical illness and income protection as they cost much more. Remember you may well get some life insurance as part of your employers pension too. You can overinsure for something very unlikely to happen. The only plus is that the younger you are the less monthly premiums will be if you start early.

FancyADoughnut · 05/08/2018 16:41

Our life insurance is not linked to our mortgage and never has been. In fact we don't have a mortgage and still have life insurance because one of us will still have to find all the bills on one wage whilst grieving. I also have critical illness for a similar reason to be able to focus on getting through the illness without worrying about bills or additional expenses.

I think you should perhaps take some professional advise on what is best for you as everyone's financial situation is different.

SanFranBear · 05/08/2018 16:47

Get as much as you can afford but I would personally go for Income Protection over Critical Illness.. you are something like 6 times more likely to be I'll and not be able to work than die whilst of working age (will try and find the stat but I work in the industry and this is mentioned a lot).

IP claims are much more likely to be paid compared to CI as the definitions are much wider. Perhaps in your position, you could have IP with a lump sum element?

It is good that you are looking at this though as so many people think it won't happen to them.

Original poster

tomatosoup1 · 05/08/2018 17:00

I think I'm more worried than my dh as he's the higher earner so thinks he'll be fine without my income. I on the other hand wouldn't be able to manage at all.
Plus we are ttc so need to plan for the future

OP posts:

SanFranBear · 05/08/2018 17:01

I can't find the research to back up my claims on how you're much more likely to be unable to work than die whilst of working age so I don't want to mislead you..

I think independent advice is definitely the way to go though - and some brokers don't charge for their services so worth a decent search (you can look here www.unbiased.co.uk)

RoseAndRose · 05/08/2018 17:03

If you do get critical illness, do check how adverse a diagnosis you need for it to pay out. For example, not all cancer diagnoses are in themselves sufficient.

fluffypudcats · 05/08/2018 17:04

I took out critical illness cover as don't need life insurance (single, no kids). To this day, I have no idea how I knew to be so sensible as I had to claim last year following the discovery of a huge brain tumour that needed emergency surgery. It paid off my mortgage but as I didn't need care, that was all. Taking it out meant that I could relax about money so if you can, don't scrimp

MereDintofPandiculation · 05/08/2018 17:10

If you're thinking life assurance and critical illness, think also about income protection.Mental health problems, for example, probably aren't going to be covered by Critical illness, but they are very effective at stopping you working for a period. Ditto most health problems that stop you working for a few months but where you'll eventually recover.

VayKayShun · 05/08/2018 21:15

Do either of you have any benefits through your work? Some do so it's worth checking that and what it would be worth

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