How much life/critical illness insurance is sensible and how much is overkill?

[BR44]

My partner and I are about to buy our first house and are looking at tweaking our existing life/critical illness policies accordingly. If we go for the policies that cover us most comfortably (and, therefore, seem most sensible) then the sums are a bit eye-watering.

What's your view on this? Should we stretch our monthly budget so that if the worst happens our mortgage gets paid off in full and we have a comfortable emergency payout?

Having never had such a major financial commitment before I have no idea what's considered normal and prudent and what is going completely over the top...

Might be worth reading the small print first, since you already have the policies.

Critical illness policies have a lot of exemptions, and you could end up unable to work but unable to claim on the insurance. You might decide either to shop around, or to hedge your bets by ploughing more money into the mortgage rather than insurance to pay off the mortgage.

Assuming you are both relatively young and healthy, life insurance should be pretty cheap. I pay about £10 a month for about £300k cover. Critical illness is more expensive, because it is more likely for something to happen. I think everyone with kids should have life cover. What income would you/your partner miss out on if you/your partner died? Do you need to have enough cover to pay off the mortgage?

Do either of you have life or CI through work? Do you have decent sick pay schemes?

Money supermarket is good for comparing prices

I have 2 DC 3 and 3 months. We are looking at 18 year policy (ie until the DC finish school) that covers mortgage plus 100K. Mortgage is going to be 25 years though and mortgage advisor recommended a policy that decreased over the mortgage term plus a fixed payout. Their quote couldnt touch what i got online though so do your homework before buying insurance with your mortgage. We also both have decent death in service benefits that would cover enough of the mortgage if we needed it. Good advice available on the monrtsavingexpert site. Can't link as typing one handed and feeding! will be interesting to see what others say.

Also meant to say that critical illness cover isn't recommended by MSE as it's so difficult to get them to pay out. Do you have any DC? Ages? It may make a difference to your thinking.

Thanks all. We have a DS aged 1. When I was pregnant we took out life and critical illness policies to supplement the cover we got through our employers. Since then I have given up work to look after the boy and now we have a mortgage, so a lot has changed. I think what we'll do is take a decreasing cover policy to cover the mortgage, keep my DP's life and CI policies but for a lesser amount (because the mortgage will be covered) and just some life cover for me. It's a bit galling to be paying out so much each month for something you hope you'll never have have to use, but such is the responsible adult world, I guess...

I completely agree with a lot of you about the trickiness of most CI schemes, but I think my attitude is coloured by the fact that a friend of mine was diagnosed with breast cancer just months after buying a house (and giving birth to her first child, incidentally) and deeply regrets not including CI in her mortgage protection...

Oh, and I will definitely not be going through the mortgage provider for the cover, either! Definitely not the most economic route.

I've never bothered with CI cover as I suppose I'm an optimist at heart and come from a family where everyone seems to live well past 90. Life cover extends to paying off any remaining mortgage and I'm covered by my work if I die 'in service'. No partner so that's not an issue. The money I probably would be paying out on more lavish cover goes into various investments for DS.

Think the important part, if you have children, is making sure your will is up to date and that you have nominated executors and guardians for the children should you both die at the same time.

I have loads Permanent health and critical illness to cover income and terminal illness and life insurance on mortgage, but my job is risky as I play with cows everyday .
So far I have not used any of it, but I have had three broken ribs, a broken wrist, a broken toe, traumatic carpal tunnel and destroyed the ligaments in one finger over the years. Though I did think my number was up the other day when a 1.5tonne bull came over a gate at me fortunately he was more interested in running away than fighting.
Seriously though you have to weigh up how much risk you are under how regularly.

Not sure but am seriously considering taking out income insurance, just in case. The way the economy is going, I think it is a good idea!!

Couldn't agree more about the importance of a safety net.

Just don't assume your private insurance is going to provide one. Read T&C very carefully and think about whether it's better to insure or to invest the money elsewhere.

(This is the point of National Insurance. It doesn't pay a fortune, but it does pay out. This may not last much longer.)

I'm a big believer in the adage "never insure anything you can afford to lose".

Work out what you would need if everything went horribly wrong. Then add on a sum that would make your life easier in the very short term. It might be £350 for a holiday or £35k for a nanny for the year. Only you know your financial circumstances.

But remember iver insuring is as big a mistake as under insuring.

Just to add, some life insurance policies will pay out on diagnosis o a terminal illness so this may be something you would want to look out for. Means it wouldn't cover things like heart attack if you were going to recover, however if you were diagnosed with terminal cancer (for example) you could get the finances sorted immediately, one less thing for your family to deal with.