Critical illness and Income protection - premiums too high?

[Wilfiswolf]

I’m a single parent with 1 child age 10
and I’ve been looking at getting critical illness cover and IP, in case something happens to me and I can’t work.

Basically, I have a biggish mortgage (£195k for 19yrs, it’s just under £1k a month) and I get very poor sick cover from work (4 weeks full pay, 4 weeks half pay and that’s it) and few other benefits. If I had an accident or got seriously ill, I’d be pretty screwed financially.

I’m happy to chuck a reasonable amount at the insurance but I’m wondering if I’m being over cautious / or have been over sold to. I’m looking at getting £50k critical illness cover, and IP which would pay out £1600 a month until retirement.

All sounds good, but both policies, plus a bit of mortgage protection which will pay it off if I die, is going to cost me £165 a month. I’m not on a huge income (50k gross). Am I mad? It’s great peace of mind but it seems a hell of a lot and before I sign, I’m wondering if Ishould scale it down. Any thoughts or advice?

I’m just about to turn 50.

If it's the best solution to your problem then it makes sense. The cost seems reasonable given your age now. What else could you do with the £165pm to generate the cushion that you are looking for?

Insurance is a funny thing because people can be reluctant to pay for it, but in the event of a claim they often wish that they'd actually bought more of it. Yes, you might never need to claim on it but on the plus side you'd still be fit and well.

Have you gone through an advisor? It might be worth if not, look at someone who specialises, they really are helpful. They maybe able to get it cheaper for you.

Personally yes is worth while given your situation. You also need a cash reserve.

The only thing is to check what is likely to be excluded and this may not be apparent u til you apply. Do you have any health conditions or recent illnesses which might be excluded?

Maybe an advisor is the way to go? If you said you wanted some protection but needed it to be cheaper, what could they suggest?

Do you have any savings that would cover some loss of income? One option to reduce cost of insurance might be to take a longer excess period meaning the insurance would only pay out due to serious illness or disablement but not if you broke your leg and took a shorter period to get back to full fitness for example.

What are your pension arrangements and would there be the option to take it earlier if necessary?

Or would there be any chance of downsizing or moving to a cheaper area if you really had to?

sorry to say, for your age it's a decent offer.
the earlier in life you take out cover like that the better.
have you checked your bank account? if it's a premium one sometimes they include insurances.

Thanks all. To answer some of the questions, I did go through an adviser who has been very helpful. I checked a couple of websites for life insurance and they came out with higher quotes than his, which was useful to know.

Excess period for IP is 3 months, so I’d need to use some savings to support myself at first. There are some health exclusions but I’d been expecting that. I do have reasonable equity in my house so that’s always an option but I figure I probably wouldn’t want to sort out a house sale if I was really ill. Could use it as a back up though.
Pension is pretty rubbish so not much to take early, or late!

Don’t forget there are also benefits for the long term sick. If you’re too ill to work and you’ve been paying NI then you qualify for new style ESA which is currently worth about £320 a month. You would have to go through the assessment process which is a bit harrowing, but worth it if you qualify. How long you can stay on it depends on how ill you are; the criteria to stay on it for more than a year are very tight.

Being on ESA also means you go on accruing NI pension credits. And unlike some other benefits it pays out even if you have savings or IP payouts - it doesn’t take those into account.

With CI, be sure that the premiums stay fixed until you no longer need it. Mine started to increase from when I either reached 50 or had had it 20 years (can't remember which). I don't remember this being explained to me (I took it when in my 20s so may well have paid no attention) so now my cover is reducing as I don't want to keep paying ever increasing premiums.

It depends on your personal circumstances I guess. I got joint critical illness and life cover because I didn’t have a spouse or kids, or parents, and have a pretty horrendous family history of cancer. I worked somewhere with a similarly poor sickness policy and was really concerned that if/when I got cancer, I’d have to take a block of time off for chemo/radio/whatever, and this wouldn’t be covered by the work policy.

At 45 I got £100k of cover for 20 years for £95 a month. Weirdly the family cancer history didn’t bump up the premium that much, but the fact that I have PCOS doubled it. I got it through a broker at Land and Country when I got my mortgage.

It’s not cheap - if I pay every premium for the length of the policy it’s £23k, and I might be paying it for nothing. But my mum died at 53 and my dad at 64 - if you told me that if I could pay £23k to still be alive at 65 I’d snap your hand off. And if I get sick, then it’s there to use.