Critical illness vs income protection

[emsler]

As first time buyers my husband and I are going through the lovely process of sorting out all the necessary insurances etc. We have an independent mortgage advisor and he's been pretty good with the mortgage but he's being VERY pushy when it comes to insurance and I feel quite nervous that he's not giving us very unbiased advice! So I thought I'd turn to the lovely residents of mumsnet for some opinions.

Did you get critical illness / income protection insurance? Which did you go for and why?

If it's relevant, we can afford our mortgage on one salary (though it would be a squeeze) and even after the house purchase will have a savings pot of around 3 months' joint income.

We didn't bother. We had better cover from our employers than either of us would get from a normal insurance product so after a while the broker reluctantly accepted that he wouldn't get any more commission.

Had critical illness insurance.. unless your probably dying it doesn't pay out . I claimed on mine.. company said they wouldn't pay and I could get another job even though financial ombudsman report drs said I'd not work again. It came down to one word in the policy.
If ifa is pushing products he's not very independent?

All I can say is that we made the decision to just have death cover on our mortgage to save money and my very healthy 35 year old husband had a stroke

He is now fine but it was a very stressful time and I kicked myself repeatedly for not having taken some extra just in case cover.

I wouldn't have income protection but wish I had taken out more comprehensive cover to cover against things like that.

We only had life and critical illness when we took it out. After children came along and redundancy happened we reviewed and now have income protection as well.

Totally worth it for peace of mind.

@fancypuffin I am the same as you. My 40 year old husband had a major stroke just 2 weeks after we exchanged on our first home. We didn't even have life cover. I have it now and also critical illness cover with my employer. He didn't have any at the time. We were actually looking into policies when it happened.

Thanks all. We were always planning on taking out one of the two but can't afford both right now so wanted to get some unbiased views! We're erring towards income protection (long term) as it's more comprehensive and then adding critical illness as a "nice to have" when we can afford it. But our broker is pushing us VERY heavily (playing the "one of us three will get cancer!" card and everything) towards critical illness. That doesn't make sense to me... Obviously it would be great to pay off our mortgage in one lump sum if one of us got ill, but with income protection and life insurance we'd still be covered, plus we can pay our mortgage on one salary anyway. And it covers so many other conditions. It just seems like the better option for our circumstances...

Hmm, IFA here - I know that all brokers will feel differently, but if you can't afford both, Income Protection is generally the bigger priority for most families. The exception would be if you have super duper sickpay through work, with a group Income Protection policy via your employer.

The broker pulling the "CI for cancer" card is a bit odd as if you were unable to work due to a cancer diagnosis & its subsequent treatment, an Income Protection would still pay out. I've had several clients claim successfully on their Income Protection policies when they've had cancer.

And it's worth bearing in mind that CI generally only covers more advanced cancers; even a lower staged cancer can result in super intensive treatment and months off work. That's where Income Protection would come into its own, although that's not to say that CI is useless - I've seen many successful CI claims in my time for heart attacks, strokes and the like.

You can always opt for a lesser amount of CI & a higher level of life insurance - presumably the broker has shown you quotes along these lines also?

Hate to ask, but is your broker an IFA (and therefore whole of market) or a restricted mortgage and protection broker? It does make a difference in terms of the deals you'll be offered...

Also, don't feel that you HAVE to take out protection via your mortgage broker.

Proc fees for mortgages are pretty low so some brokers will try to offset the low fees by selling protection plans. As CI plans will generally have higher premiums, this will mean more commission for the broker. Make of this what you will...

IP is the more comprehensive option, as it covers more eventualities and can continue to pay right up to retirement, however it does tend to be more expensive than CIC, and in my experience, more harshly underwritten so can be more difficult to get and premiums hike up if you do a dangerous job.

But if you can afford it, and are accepted for it, go with IP. (Make sure you take a life cover policy too though, life cover is usually included in CIC but not in IP)

Uncomfortable Badger Thank you so much, that's all incredibly helpful. To be honest I was getting a suspicion that this guy wasn't giving us particularly good or unbiased advice. He essentially gave us one quote for CI and life insurance and acted as if we had to get it and there were really no other variables. When I said that we wanted Income Protection instead and couldn't afford both right now he said "If you can't afford Critical Illness, you can't afford to get a mortgage." He's a mortgage broker who also arranges insurance so it sounds to me like he's not the right person to get advice from. I think we'll just say no and seek advice from an IFA - is there anything we should look out for when finding one? Stupidly I'm a bit nervous now that the broker could drag his heels on our mortgage arrangements in 'revenge' - he got us a good deal on the mortgage but I'm aware there's still a lot of work for him to do!

Eminybob Luckily both of us have desk jobs! We're not averse to paying for it as it would bring real peace of mind - also both our jobs have fairly good sickness policies and we have good savings pots so we can defer it by 6 months which should help.

A final question - the broker is insistent that if we search for any policies ourselves (or home and contents) on comparison sites it will impact our credit rating and put us at risk of not getting the mortgage. Is this really true? Plus our credit ratings are very healthy (999 and 961) and we're borrowing a small amount of money with a 15% deposit.

I feel like we're getting played, to be honest... Unfortunately this guy was recommended to us by relatives so we naively assumed he'd be trustworthy!

Tricky one.

If you're on a comparison site then you may have either a hard or soft credit check done when getting quotes for products that involve a credit agreement (e.g. car or home insurance with monthly premiums). A soft check is only visible by you & the credit agency, whereas the hard check leaves a visible footprint.

I certainly advise clients not to take out any new credit inbetween a mortgage application and completion - reason being, any new commitments (loans, credit cards, car finance, 0% furniture deals etc) will affect affordability calculations & the lender may reduce the mortgage offer or even rescind it altogether. Lenders will spot check a certain number of cases prior to completion, running revised credit checks so no getting it past them. Lots of hard searches for credit products would show up and wouldn't look great.

That being said, a lender would appreciate that you're going to need home insurance for your new property! And the same with life cover (although this isn't a credit product). Most include these as part of the affordability calculations for the mortgage application.

The protection quote software that myself and most other IFAs would use has no bearing on your credit report though so nothing stopping you seeing another broker.

Thanks UncomfortableBadger. I think we're going to tell the broker that we're seeing an IFA to discuss wider matters including pensions etc and so we'll also discuss our mortgage protection with him. I'm just not comfortable that the broker is truly acting in our best interests as he's not really listening to our specific situation and what will work best for us.

We will definitely avoid taking out any other credit (besides home and contents) - we're borrowing over £100k less than we were offered in our original AIP so hopefully it shouldn't be a problem. (We're not rich - just very lucky in that we live in a cheap area and can effectively afford to buy on one salary.)

Thanks again for all your help - I feel much more reassured.

1 in 3 of us may well get cancer - but your guy is giving you the hard sell as 1 in 3 of us will not die of that cancer and a lot of us will be cured and carry on working after some time off.

Quite a lot will also get said cancer after we have retired and paid off the mortgage.

FWIW I have term life insurance and income protection and critical illness - depending on your career it's vital your policy pays out if you are not able to do your job, not any job.

Shopping sround will absolutely not effect your credit rating.

Your broker sounds like an arse.