Critical Illness or Pension drawdown - wwyd?

[Sunrisewatcher]

I'm trying to weigh up which I'd be better doing should the unthinkable happen and I'm struck down with serious illness etc before retirement at 67/68 😩 and need the collective brainpower of Mumsnet.

So, the facts...
58 year old divorced female.
No children or dependents.
£1,500pcm +/- Take home salary.
£1000 Monthly outgoings inc mortgage and rent
3 months rainy day savings.
Shared Ownership home (45% share with 28k mortgage - 26k current balance, paid off in 10 years when I'm 68),also paying rent to local housing group (No other debt).
Pension pot currently 70k - forecast 80k at age 65.
I've recently changed jobs, my previous had critical illness as a benefit but the new job doesn't.

If I should fall seriously ill, I believe I would only be entitled to SSP of about £100 pw and that I believe is, for a very limited time so, besides my 3 months rainy day savings I really need to put a safety net in place.

I've done an online quote for Life Insurance with Critical Illness cover and Virgin Money appear to be best at £16.99pcm which would pay off the balance of however much was remaining on my mortgage and a one-off payment if diagnosed with cancer, heart attack, stroke etc. I am fairly healthy right now.
Or, I could forget the Insurance and rely on using the 25% tax free drawdown from my pension.
What would you do?

I think it's wise to think of your financial security in these circumstances. But
I would broaden your parameters of what this would encompass and think of a range of scenarios - such as how would you cope if you were ill or injured temporarily such as a broken leg lasting 6 months to 12 months?
I would do a number of things....

• Check your entitlement to state benefits should you become unable to work.

• Check your pension benefits - Is it a personal pension? Does it have any similar disablement/injury benefits that would cover you for critical illnesses before retirement? What is the earliest age you could access the pension if you were unable to work? Does your current employer provide a pension that has enhanced cover for these scenarios that is worth signing up to?

• Look at income replacement policies should you become temporarily incapacitated - such as a broken leg. Although you are looking at critical illness cover - the possibility that having to take 6 months to a year off due to injury /illness could leave you financially vulnerable.

• Study very thoroughly the t&c's of the insurance you are considering, to ensure adequate cover. Look at reviews of the company and the product to see the likelihood of rejected claims, why they are rejected, and how long a payout usually takes. I would consider using a specialist broker for your needs, and also see if your mortgage provider has a discounted rate for similar cover.

When you have all of the information, I would formulate a financial action plan - most urgent action to least, and try to work through this over time. Somewhere on your list, I would try to aim for a savings pot of at least 6-12 months salary. Appreciate this is tricky under the present circumstances, but having a financial action plan in place is a good start.

@seekingasimplelife Thank you so much for your very informative reply. I was thinking after I posted that I really need some type of cover or plan B for the type of unforseen short term incapacity that you mention. Also, I didn't realise there was such a thing as income replacement policies - I'll be looking in to all these suggestions so thank you 🙏.

Some useful information here:

www.citizensadvice.org.uk/consumer/insurance/insurance/income-protection-insurance/