Critical Illness Cover is it worth it?

[Juo]

DS is 24 and in the process of buying a house and is wondering whether to buy critical illness insurance. He's not bothering with life insurance because he has no partner or dependents. I'm struggling to find any good advice online, my instinct is that it's expensive and they have a reputation of not paying out.

I think this really depends on circumstances. I have crit and life insurance now that I am settled with my DH. Before that I didn’t see the point really. Certainly not for life insurance as my family would’ve just sold my house and banked the deposit.

As for crit though, I have very good OSP so it might depend what situation your DS is in. Also how big would his mortgage repayments be. If the worst happened and he was unable to work at all? Presumably he’d probably get some sort of disability benefit or he could sell his house and start renting if he was unfortunate enough to be told he has a terminal illness. He might want to do that to spend the deposit while he can!

Its a great idea if you can afford it.
You are protecting yourself not anyone else
My brother in law had it and it was a godsend that he had critical illness cover when he sadly developed a brain tumour at the age of 29.

@Bumble84 What is OSP?
His mortgage repayments will be much less than he currently pays in rent.

I presume CC doesn't cover covid (am I wrong?) Just wondered.
20yo DS is in Army so has had several types of insurance & I think it's ridiculous, especially since he doesn't even own a property. He doesn't have any need for most of them. They need kit insurance in Army, is main thing. Apparently his life insurance is dead cheap though, like £7/month.

Yes it’s worth it, we had it despite being sure neither us would get sick, it’s been a bloody lifesaver! It paid out within a month and was enough to clear the mortgage.

OSP - occupational sick pay.

As pp said I think of you can afford it then it’s a good thing to have. It becomes more important in my view when you have a partner and/or child dependants

Yes it is absolutely worth it

Ah OSP = company sick pay!
He's a teacher so I guess six months full pay.
As I said though he has no partner or dependants, that would be completely different.
Seems like it should be a pretty cheap insurance for a young single healthy person and probably worth it.

I think I was confusing it with mortgage protection payments which were notorious for not paying out.

I mean, in an ideal world we would cover ourselves for every eventuality because sometimes the worst can happen and we have no idea what the future holds. That said, the people I know who have this cover have SO many caveats in their insurance that I'm wondering if its worth it. Eg- it wont cover certain illnesses etc so I'd be careful about that.

My house flooded a couple of years ago when our american fridge freezer which was attached to the mains by a faulty valve leaked. It caused 40k worth of damage. After months of battles with the insurance company they finally paid out. They covered 40k worth of damage for a £230 policy. It was SO worth it and was money well spent. Just goes to show how important insurance can be at times.

The premiums may go up as you get older though. You can choose to pay them or reduce the cover. Which, if it's to pay off the mortgage, may not really be a big issue.

I took out critical illness cover when I bought my house 7 years ago. The premium was £25 per month. I was single at the time so I didn't bother with life insurance.

Earlier this year I made a claim after being diagnosed with stage 3 cancer. The claim was accepted and as the policy was worth more than the mortgage (I've remortgaged for better rates during the 7 years) not only was the mortgage paid off but I also got a lump sum payout. It's been a huge help as at the time of my diagnosis my partner made been made redundant (he's now working again). It's certainly worth it for a small premium.

Check out also Income Protection insurance as an alternative to critical illness cover. Income protection covers more illnesses than critical illness, pays a monthly income not just a lump sum, and has higher claim acceptance rates. It’s more expensive, but as a teacher your son could opt for a deferred payment period starting when his OSP runs out rather than straight away. That brings the cost down considerably.

ScarletAnemone I didn't know that about income protection covering more conditions.
It's a minefield on top of all the stuff that goes with house buying.

Income protection insurance with a six month deferred payment sounds like it might be most suitable and cost effective.

Also, you say that his mortgage will be cheaper than his rent, so another thing he can do is think about how long it will take for him to save a decent emergency fund. If he has a lot of spare income, he might be able to save a year or two's mortgage payments in not very long, to give him a decent cushion, should he not be able to work.

If he's a teacher, he should always be able to find work, even if he needs to take a an extended period out due to serious illness, he should be able to get back into work when he's well enough, so it's just bridging the gap.

And if he becomes so ill that he can't work again, his pension will probably pay out on medical grounds, so in his current circumstances, he's probably already adequately covered, so not worth all the all singing all dancing policies that whichever advisor he's been talking to wants to sell him.

Can anyone recommend any providers for critical illness or income protection cover? I keep putting it in the too hard basket and have also been sceptical about whether anyone would actually pay out but I think I need to look at it properly.

If you do not have good sick pay then it could be a god send,
For example if you have to claim mortgage interest from the State there is (9month) waiting period and an income protection product would cover this period. Also better than Housing Benefit if renting.
My mate did it (young) via employer (a bank) and it covered her for a non-critical illness .
As with any insurance though read the small print and be aware they calculate risk prior to offering it to you

BarbaraofSeville I think you've nailed it there. I will suggest he gets quotes for income protection with a deferred payment and see how much it might cost him but having a sizeable emergency fund is probably enough. He will be able to continue saving because of low mortgage payments and is not using all his savings for the house.