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Original poster

Help me understand life / critical illness insurance

12 replies

jenga079 · 14/04/2011 13:05

Originally posted this in Chat, then realised it might be better here...

DP and I currently live in my flat. I have life insurance and critical illness cover linked to the mortgage which, if I understand correctly, means that if I get a terminal illness or die the mortgage will be paid off. He has life insurance through work (if he dies, I will get a lump sum payment)

We are expecting our first child, are about to buy a home together and are struggling to get our heads round the different kinds of insurances (and how much they cost!!!) To be honest, I hate even thinking about it, because obviously I hope we both live happily ever after, but I know how important it is to make sure we're both properly covered, especially as we're unmarried and LO is on his way.

Can you help me understand please?

Our bank has suggested we take each take out separate life & critical illness cover. If we take out the policies they are recommending it will cost us about £150 each month altogether, which seems A LOT to me!

DP has found joint life & critical illness policies, online, but through reputable companies like BUPA and Aviva, and these cost around £60 per month altogether.

So...

  • Are we better off just going with what the bank recommends? I don't want to 'scrimp' on something so important, but equally, don't want to waste money.
  • Why would the bank recommend separate policies? What are the benefits?
  • Can DP keep his life insurance through work AND take out a joint policy with me? If the worst happened, would both pay out?
  • Is there anything else I should be considering?

Thank you!

OP posts:
ajandjjmum · 14/04/2011 13:09

Insurance does cost a fortune! If you can afford it, it can be worth it for peace of mind.

Life assurance pays out if you die, critical illness if you have a critical illness - but the list varies dramatically between insurers, so make sure you have good advice on this.

Some life policies will pay out if you're terminally ill, before death, I suppose so that you can get things in order.

The bank would recommend separate policies so they get two lots of commission. Cynic - me!!!

You can have as much life assurance as you need.

Your mortgage should have a separate policy attached to it.

Hope you can get good, professional advice.

Lizcat · 14/04/2011 13:44

The Bank can probably only recommend their own products so shopping around you are likely to get a cheaper deal.

Chil1234 · 14/04/2011 17:07

I would recommend you shop around for life cover adequate to pay off the mortgage so that the surviving partner is not left homeless. Anything else is a nice to have. Critical illness cover is extremely expensive and insurance companies are notoriously poor at paying out on the policies i.e. limited list of allowable illnesses and lots of get-out clauses. Your bank will recommend the most expensive package so that they get the biggest commission.

If you're really thinking about the future, make sure you make wills. Marriage is a very sensible option if you're going to be parents as it simplifies a lot of the 'next of kin' administration and means you are excluded from inheritance tax. But wills are important regardless.

mosschops30 · 14/04/2011 17:11

Never ever listen to what your bank is recommending.
Get an independent financial advisor or use a website like moneysavingexpert.com to shop around for the best deals

LaurenSimplyFinance · 14/04/2011 17:21

I agree with mosschops30 - go to an independent financial advisor, and get balanced advice. look at www.simplyfinance.co.uk/insurance/life-insurance.html or post a question to an advisor there online.

eggspectantmum · 14/04/2011 17:26

Think long & hard about whether you want critical illness cover. Having worked in NHS it is almost impossible to actually get money out on these should anything be diagnosed. Think it just leads to more distress for vast majority.

Mrsfred · 14/04/2011 17:33

I would suggest seeing an independant financial advisor rather than taking advice from your bank. They will shop around for the deal that best suits you. Go with one that is recommended to you.

Eggs that is a very sweeping statement which, from personal experience, is incorrect.

Original poster
jenga079 · 14/04/2011 17:50

Thank you ladies.

We've done some more searching and I've sat down with the policy docs from the bank and the ones from the insurers DP found online and there seems to be very little difference in terms of the actual cover. Just the price!

I know there are lots of questions over whether critical illness cover is necessary or not, but I have a friend with MS and have seen how difficult life is for her so I definitely want cover 'just in case'. BUPA seems to cover a lot more illnesses than the bank policy does.

For now, the plan is to get life and critical illness cover that would pay out a lump sum to cover the mortgage if anything happened to either of us. In a year or so when we can see clearly how much money is coming in and going out once LO is here and we're in the new house we'll get in touch with a financial advisor and discuss 'extras'. Does that sound sensible?

Wills are next on the list chil; I promise we'll do them before the mortgage goes through Smile Marriage will happen some time in the future, but for now moving house and having a baby seems like enough to organise!

OP posts:
Chil1234 · 14/04/2011 18:14

If you're a healthy young couple then some life cover on the mortage (and critical illness if you can afford it) is probably all you need. Glad you're going to organise wills because -even with insurance - if you have no will, death is a pain in the arse for the survivors. Regarding 'extras', when it comes to insurance they'll always try to convince you that there's some terrible risk on the horizon that might happen.... they're in the scare business. So keep a cool head.

Finally, make sure you are scrupulously honest about every single illness in your medical history for the critical illness cover. Having known someone stricken by cancer who couldn't cash in their critical illness policy because they hadn't declared an episode of arrhythmia from some 7 years prior, you can't be too careful

eggspectantmum · 15/04/2011 12:02

Mrsfred very pleased to hear you were successful. Still suggest you are in minority. See also point made by Chil1234.

Nothing to stop anyone putting into a savings account the money they would consider paying for critical illness. Then it's still yours & you can get it without arguments.

Gonzo33 · 15/04/2011 15:44

Just to say that you will need to get your will re-done when you get married or you will need a codicil put in.

hermioneweasley · 16/04/2011 21:15

depending on your age (and i'm guessing as you're having first DC you're not in your 50s), life cover shouldn't be that expensive. ours cost about £10 a month each.

critical illness is more expensive (typically £30/month each, depending on your medical history) because you're more likely to claim. having said that, it is notoriously difficult to claim. just had to get involved in a hige protracted debate our company critical illness provider because the employee had a type of brain tumour that wasn't covered.

if one of you got very ill, could you cover the bills in another way?

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