Income protection/ mortgage protection/critical illness - which to get?

[AmIGoingMad]

I'd be grateful if someone could help out on this one!

We have a mortgage and have life insurance. We also have one or two loans and some credit cards that we are paying off ( haven't spent on them in over a year now).

At the moment we're both employed and earn decent wages. As we have these financial commitments and also 2 young children we've started to look into some sort of protection insurance. I get six months full pay and six months half if sick but nothing after that. DH doesn't get that. DH has been made redundant in the past but everything seems ok at the moment where he is.

Any suggestions as to what we need?

I would put critical illness at the bottom of the list - you could always get quotes but then put what you would have paid into a savings account. That way you win both ways - the insurance can be very hard to claim on.

job loss is very likely for most people, so if you can't cope for six months without incomes you need income protection ASAP.

Thanks for your response. It really does seem like a minefield!

I don't have cover for any of those 3. They are too expensive IMO. I prefer to do what specialsubject says and build up savings instead. But that is just me - doesn't stop mortgage brokers constantly trying to sell me though ...

I have critical illness cover but that's because I turn 50 this year and am feeling mortal finally. :) Check the details of any income cover because some don't kick in before six months, by which time you could be re-employed anyway. Life cover on the mortgage is usually required by lenders. Ultimately, it's really what you can afford, your attitude to risk, and whether the premiums would be better saved.

Have you got up to date wills? That's something that is often overlooked.

Not critical illness
People don't tend to lose their jobs through critical illness ime
Much more likely to be chronic illness or plain old fashioned unemployment.

No we don't have will either. We've just realised how unprotected we are on lots of these things and are trying to get them sorted now. It's just all so confusing and DH isn't keen on paying for a financial adviser.

The more I look into this, the more baffled I become! It seems that even with some of the long term income protection moves the goal posts for my profession after the first 12 months. I think that with regards redundancy then we're best off putting money away by way of building a buffer. But with illness I think it could be worth getting an income protection policy and possibly getting an adviser to help us find the right one. I've come to the thought that I need long term, guaranteed payments, own occupation that stay own occupation for length of benefits and doesn't change. As I'm a teacher it seems difficult to find one that maintains own occupation. Oh, and they all cost around £45-50 a month which seems a bit crazy too so maybe just savings for this too?

Any other ideas/advice/feedback gratefully accepted!

The critical illness cover I have investigated stipulates that they only pay out for the first x months, and only if you don't get any cover from work. It might be worth it for your husband, but I suspect not for you. It wouldn't have benefited me in the slightest.

Life insurance I have found to be pretty cheap, actually, as long as you shop around and only pay for the cover you actually need. Ours is ~£5/month each, we're both in our late 30s, it's tied to the term of the mortgage (so reducing payouts as we need them less), and we have separate policies, which turned out much cheaper than a joint policy. We also have decent death-in-service benefits attached to our pensions, so any life insurance payout would be on top of that.

Income protection is the one I am not sure about. Either of us would be entitled to a few months' salary if we were made redundant, and hard though it would be, we could manage for a while on one income. There are also some pretty tricksy rules on claims for job losses... I just wouldn't count on them not trying to weasel out of paying up.

Thanks for that info.

Yes I agree that some of the rules seem 'interesting'. To be honest the redundancy part of the income protection seems to have too many get outs. I'm most interested in the sickness and accident long term policies that give you up to 60% of your monthly gross salary until pension age were you to be unable to work through illness or accident. At the moment I've got sick pay that would do this for up to a year but if I was ill past that point then its nothing. That's the bit I find scary. DH only has statutory sick pay so that's even more frightening! Although why after all these years I'm not stressing about getting this sorted out on a sunny bank holiday weekend is beyond me! I think it just feels a bit now or never!

Stressing not not stressing!

One of my clients is currently trying to claim on his critical illness policies and they are wriggling like fury.
He has a battle ahead - and that is BEFORE they do his heart surgery.

OP
Get your wills sorted out.

Then get life insurance - separate policies for you and your DH so that if anything happened to either of you, the other would be OK while they picked up the pieces.

Then get quotes for the various policies
and do not take any of them out
instead, put double that amount into a savings account each month
(have you filled your ISA allowances as they are a good cushion)

if you stay healthy you have great savings for later
if not, you have the funds without a fight

That's sensible advice.

Thanks for posting!

You do realise that as a teacher(assuming you're employed under standard t and c and that you're contributing to the teachers' pension scheme) your named partner/dependants will receive 2 and half times your yearly salary in the event of your death as well as some accrued pension. So that is a substantial life insurance policy in itself.

Agree about avoiding the CI cover. I was talked into it 20 years ago with my first mortgage. Last year they offered to keep the same cover for about 3 times the monthly payment. Nice. A quick google says this cranking up of payments would go on and on.

Thanks both!

I'm feeling that way about critical illness cover at the moment.

Bamboo I knew there was a death in service benefit but its true that I need to look into the benefits in more detail before taking out other policies. Thanks for that- has highlighted the research needed!