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Original poster

Mortgage for my new house: do you have critical illness/life cover

55 replies

Bouledeneige · 15/01/2021 12:08

I am in the process of buying a new house. I am divorced and I'm 56, the mortgage will be in my sole name. I am having to increase my borrowing a bit with the aim of it being paid off in 9.5 years. I have got a quote for critical illness cover and life cover which comes to £170 per month - this is mainly in case I get ill and cannot complete my payments. I don't want to have to sell the house. But without being indelicate or presumptive my father is 91 and when he dies I am likely to inherit a reasonable amount of money - I could even pay off my mortgage entirely. But that will depend on what care costs he might have in the coming years. I have not made any assumptions about this re my borrowing or future prosperity.

I'm a little worried about my job security and if I have to get a new job whether I will be able to match my salary. It seems that in my sector salaries are going down at the moment so I am anxious about having a larger mortgage. So I've been wondering whether I need to pay the critical illness cover. On the other hand its only £170 a month for peace of mind.

Can I ask - do you have this cover?

OP posts:
Smallgoon · 15/01/2021 12:14

I don't have critical illness cover. I decided against it. I'm 35 and the cover for me was £25 a month.

On the other hand its only £170 a month for peace of mind.

That's a huge amount! But our circumstances are very different.

1990shopefulftm · 15/01/2021 12:14

I have critical illness cover and life insurance but as I took it out when I was 22 it's only £10 a month for my half of the joint policy, people in my family have died suddenly without things in place so I think the cover is important for piece of mind.

Your father's care could be very expensive if he did need any in the future so I d be prepared for that possibility and you could always cancel the cover if circumstances change in the future.

StephenBelafonte · 15/01/2021 12:18

Are you in a position to self insure? Put that £170 a month and pay it into a pension where you'll get 25% top up plus whatever it earns in the pension - then if you need to in a emergency, you can draw down your pension.

The problem with critical illness insurance is that companies don't actually ever pay out Grin - they go to the most extraordinary lengths to come up with excuses as to why they shouldn't pay including if you didn't declare a verruca you had when you were 8 years old lol.

Original poster
Bouledeneige · 15/01/2021 12:22

I shouldn't have said £170 is not much money. I am questioning having it because it is that much. I meant that it is paying for peace of mind. Obviously that reflects the size of my borrowing and my age. My mortgage is quite big at my age but its due to settling my divorce and having to give my XH 20% of the proceeds of the sale.

I'm not assuming that I will inherit from my Dad - I'm aware the costs of care can be catastrophic. But yes my circumstances could change and then I could cancel it.

OP posts:
ComtesseDeSpair · 15/01/2021 12:23

I looked into critical illness but could never find a policy that didn’t look like it would wriggle it’s way out of paying out for a whole range of conditions in particular circumstances so never bothered. Things may have changed since I last looked though. I have death in service benefit through my employer which would cover the mortgage if I died (not that I particularly care about that - I have no DC so no real reason to care what happens when I die) and an income protection policy which covers me for up to 75% of my income for up to 36 months if I was made redundant or unable to work due to sickness or accident. To be honest, those seemed like more likely scenarios than permanent inability to work, and insurance is all about insuring for what you think most likely.

SausagePourHomme · 15/01/2021 12:29

I think you need to get a few more quotes. That's crazily high.

maxelly · 15/01/2021 12:30

We don't - no dependent children and jobs with good sick pay and death in service benefit means for us the money that would have gone on critical illness cover/life insurance is better spent on investing/saving into a rainy day fund that will cover the mortgage for a good period if sh*t hits the fan. But obviously it's a different equation if you have dependents you wouldn't want kicked out of the house in the event of your serious illness or similar - but do read the small print really carefully as so many policies will do virtually anything to avoid paying out!

Original poster
Bouledeneige · 15/01/2021 12:58

Thanks for these very helpful replies. I will check the small print of my pension and employment contract to see what that death in service cover I have and the draft policy - their wriggle room is a very good point. I have the booklet here in from of me but keep doing other things because I can't bear to read it!

In the current climate I'm also interested in redundancy cover. I'm interested ComtesseDeSpair that you have 36 months cover. I was just reading up on such policies and 12 months seems to be the norm.

OP posts:
Original poster
Bouledeneige · 15/01/2021 13:00

Its a good point about getting more quotes. I do still have a sizeable mortgage of £150,000 to pay off in 10 years and I am 56 so more likely to get ill I guess than someone in their 20s or 30s.

OP posts:
RealisticSketch · 15/01/2021 13:05

When I mortgaged in my 30's I did as the premium was lower and I could afford it. When I remortgaged in my 40's it was higher and I couldn't afford it. That made it a simple decision. I would do it if the money involved wasn't going to be missed from my monthly budget too much.

ComtesseDeSpair · 15/01/2021 13:07

@Bouledeneige

Thanks for these very helpful replies. I will check the small print of my pension and employment contract to see what that death in service cover I have and the draft policy - their wriggle room is a very good point. I have the booklet here in from of me but keep doing other things because I can't bear to read it!

In the current climate I'm also interested in redundancy cover. I'm interested ComtesseDeSpair that you have 36 months cover. I was just reading up on such policies and 12 months seems to be the norm.

I’ve had my policy for almost a decade - I suspect that right now, with many people’s jobs uncertain and the greater likelihood of people claiming sick leave over the next few months, the most beneficial policies are going to be harder to come across. Give it a year or so and there will be better deals available. I got mine through Trent Services, worth investigating.
cravingthelook · 15/01/2021 13:08

Yes and although I'm not the same age, (40's) in a similar position after split (but don't have any potential inheritance)

I had to shop around, my first quote was sooo high. I have good cover at a reasonable price now.

pitterpatterrain · 15/01/2021 13:10

I have it but like others mentioned it is through work, both critical illness and death in service

Not sure I would be sufficiently organised to sort it out otherwise and have heard as other PP mentioned of the companies wiggling out of it in a way that is disappointing

Shehasadiamondinthesky · 15/01/2021 13:16

I can't afford to pay that, £170 a month is a massive chunk.
I have life cover the absolute minimum but I've only got 30k left to pay off.
I just refuse to worry about it - I've got less to worry about than most as I work for the NHS. Yes I could get cancer or whatever but if that happens I'll just downsize into a one bed flat or a smaller house and pay off the mortgage.
I'd much rather spend that £170 in paying off the mortgage early which is what I'm doing.

ElleMcFearsome · 15/01/2021 13:18

We had it. Heathy non smoking veggie husband (56) had a haemorrhagic stroke in January 2020. He’s recovered incredibly well and is now back to full time work (WFH) but the insurance paid out in about 3 weeks. One set of forms, I’ve letter from consultant and boom, no mortgage. The mortgage company even waived the early repayment fee with proof that it was being paid off due to critical illness cover. Ours was about £100 a month and turned out to be well worth it.

PresentingPercy · 15/01/2021 13:21

The older you get, the more it costs. The older you are the more likely you are to be ill. Age matters. Shop around but any insurance which could have to pay out £150,000 is never ever going to be cheap. Most people don’t do critical illness. They only cover death if they are older and move if necessary using equity.

MissyB1 · 15/01/2021 13:25

We’ve always had it (for 20 years) but the bastards won’t pay out now Dh has been diagnosed with a brain tumour Angry despite the policy clearly stating it covers all cancers. LV are saying without a biopsy it’s nit cancer. But the tumour is in a part of the brain that is not safe to biopsy. The diagnosis has been made by MRI scan and has been agreed on by some of the top experts in the Country. But hey ho a bloody insurance company know better Hmm

RunnerDown · 15/01/2021 13:26

I’m around your age op and I would absolutely pay for the critical illness cover. I know lots of folks who have run into health problems, and needed chemotherapy or surgery and have not been able to work for a while. And you have no one else to rely on if this happens to you. I might have taken the risk when I was younger but not now.
And the critical illness cover has paid out for the people I know.
I would look round for a cheaper quote though.
Could you extend the length of the mortgage to offset the costs - as you may inherit money to pay off the mortgage before it gets to the end of the term

Africa2go · 15/01/2021 14:07

OP have a look at different options. Life cover is fairly cheap, its the critical illness that is expensive.

You don't necessarily need the full amount in critical illness cover - so for instance, you could have a life cover policy for £150,000 with £50,000 worth of critical illness cover. Have a think about that you actually need. It's worth speaking to a few of the insurance companies about what options they have, what quotes they can offer.

I appreciate that your situation is different but my H was diagnosed (again) with a critical illness some years ago and couldn't work for a few months. I'd taken a year's maternity leave (longer than you get paid for) so was unpaid at that point. We went from earning 2 comfortable salaries (several thousand) to about £70 a week statutory sick pay. We did have critical illness cover but since he'd had the same illness in his early 20s, it was excluded. You have no idea how quickly you can go through savings when you have 2 young children, a mortgage, bills, food etc and £280 a month. The last thing I needed to be thinking of when he was in hospital was how will we pay the mortgage?

£170 does sound like a lot, so shop around, but give it some serious consideration.

Original poster
Bouledeneige · 15/01/2021 15:00

I've not had this cover before but thought it would be sensible to have critical illness because as you suggest RunnerDown at my age I'm concerned that illness is more likely and I would be in a real bind if I couldn't work and cover my mortgage. I'm not the least bit bothered about life insurance - but it comes with it in the policy I've been offered. My kids will inherit everything anyway from my estate.

I think I will get cover but I'm going to shop around for quotes and see if I can get a better deal.

OP posts:
Outnumbered99 · 15/01/2021 16:25

Worth talking to a broker about your options, PHI might be more beneficial and cost efficient than Critical Illness cover.

I wouldn't be without as much cover as i can afford but i work in the industry and have also been the beneficiary of a Critical Illness payout in my twenties so i have a different perspective than most.

@MissyB1 I would be appealling and appealling that is such an awful situation, i am sorry.

PresentingPercy · 15/01/2021 18:44

Life insurance pays off the mortgage so your DC don’t have to. That’s the cheaper bit and a no brainer for most people. What will they inherit? Your debt to the mortgage company? If you have plenty of equity then you could downsize. If you have no equity your dc would inherit your debt.

Original poster
Bouledeneige · 15/01/2021 22:33

PresentingPercy I have a huge amount of equity in the house so they'd be left with a lot of money if I died. Over £800k between the two of them if the mortgage had to be paid off. So I'm not bothered in the least about that. Sorry to flash figures like that around - London house prices are ridiculous and I've made a huge amount on my investment.

OP posts:
Original poster
Bouledeneige · 15/01/2021 22:34

Sorry I meant to ask - PresentingPercy - what is PHI?

OP posts:
FollowYourOwnNorthStar · 16/01/2021 05:33

Hi OP, I’m a bit younger than you, but when I got a mortgage (just me, no partner), I looked at this closely, as I was very conscious that if anything happened to my income-earning abilities (job loss, injury, illness etc), there was no one to cover mortgage payments.

After weighing the pros and cons, I decided against it, but to ease my mind abit, I would:

  • put the payment amount into my mortgage
  • save and build a buffer of 12 months payments in my mortgage (these are paid ahead on the mortgage but can be redrawn if I need cash. Now they sit there reducing my interest)
  • look after my health more (it was pre-Covid, but until I got the mortgage I didn’t think about the possibility of getting sick).

2 years on I am happy with my choice. My money is working for me, not an insurance company that may or may not pay out. However I accept it could have been different had something happened before I built the one year buffer of payments in place.