Critical illness or income protection?

[eastmidlandsmove]

I'm technically self employed single mum. I earn 1000 a month + another 1000 from another job on a three year contract.

I'm applying for a mortgage (quite a small one) and I will take out life insurance. I'm not sure whether to add on critical illness or income protection. I got quotes for life insurance + critical illness for around 20 a month. (I'm 27, smoke e ciggs).

I couldn't seem to find quotes for income protection, and it all seemed rather confusing. I've heard its more expensive and doesn't cover redundancy right? If it doesn't cover redundancy, I'm erring towards the critical illness. I'm self employed and might be classed as working in the arts which I hear is even more complicated.

My mortgage payments are so low, they could almost be covered by baseline universal credit if I lose my job.

I do worry about cancer in my 40s, as my grandma had skin and breast cancer. - I would take out a 25-30 year policy.

Term life insurance , not depreciating term (sometimes call mortgage life insurance/protection). In the event of you dying you want a payout for your children which covers not just the mortgage amount.

Critical illness is what I would look at. You can self insure for income protection - by having an emergency fund of 6 months of expenses.
Think about timescales - see what critical illness covers, you want it to cover things that would result in you not working for a long period of time, 6+ months to many years.

You don't need 25-30 years of life insurance. Look at what age your children will be at end of policy - you want to cover the period of time until they have flown the nest.

In 15-20 years time your situation may be very different to now. You may have no mortgage, no children relying on your income, you may have a spouse. You may have stopped smoking and be super fit. So look at shorter term and see what the premium difference would be.

You may decide you want more coverage in the future - your business may be doing super well and thus your loss of income would be more of a valuable loss to anyone dependent on you.

Thanks for the reply.

I smoke electric cigarettes, so I don't think the premium is quite as much as smoking smoking - ah I was assuming it would get more as I get older, even if I do quit vaping!

6 months saving is good advice - I think i'll do that, and will go for the critical illness, and I'll look at shorter term and see the difference it makes.

The quotes were based on 150,000 life insurance (65,000 of that on mortgage) + 40,000 critical illness.

Read the Martin Lewis website as a guide to levels of cover. Think he recommended 10 x your salary.

You can't get redundancy cover if you are self employed. Critical illness will pay out a lump sum if you are diagnosed with a critical illness such as cancer, heart attack etc. Unless you have it as an add on to your life plan then your life cover will cease - i.e. a life OR critical illness plan will pay out once then cease but if you have a life AND critical illness plan then it pays out in both cases - i.e. if you have cancer it will pay the lump sum and keep going to the end of the term. If you die before the plan expires it will pay out again.

Being self employed I would think income protection would be more important - if you can't work due to illness or accident then you will receive an income - really important for cashflow. You can choose your deferred period i.e. how long you could survive on savings before you need an income and the plan would pay out after this. It will pay out until you return to work or until you reach the plan expiry date whichever is sooner. It is more expensive than critical illness but covers a different need.

Income protection over Critical illness.

CI policies are hard to claim on. Income protection you have a docs note that says you can't do your current job and similar and it will pay out 50-75% of your income until you return to work /retire.

Do the maths the payout you receive for IP is much higher than a lump sum you'll have to fight to get a pay out and definitely won't be enough to last you until you retire unless you're able to afford 500k payout

Used the sell this stuff