Life cover, critical illness cover and income protection...
Discussion
As first time-buyers we're about to exchange on our first 'family' home for ourselves and our 9mth old son. As part of the buying process we've sensibly been advised by our mortgage broker to consider Life cover, critical illness and income protection.
Life cover is a no brainer, however I do have a couple of questions:
1. Is critical illness cover recommended, or are there so many exclusions to the policies it's nigh on impossible to get a good level of cover?
2. I'm not sure I quite yet have a firm grasp on all the pros and cos of decreasing v level term. what's the most common. It seems level term is most sensible?
3. I've been offered a decreased level of payout for the critical illness (e.g. Life covers entire mortgage, critical is roughly a 1/3 or mortgage value). This cuts the premium down considerably, but given I don't know how much these critical illness items cost, I wouldn't know if I needed £100k, £200k or even more for my critical illness cover.
4. Any particular providers to avoid, or indeed you recommend?
My gut feeling at the moment is telling me to get 2x level term policies, but with a reduced critical illness cover. But given I'm totally new to this, any help or pointers would be much appreciated as I'm going to be having to make a decision in the next few days.
TIA
Life cover is a no brainer, however I do have a couple of questions:
1. Is critical illness cover recommended, or are there so many exclusions to the policies it's nigh on impossible to get a good level of cover?
2. I'm not sure I quite yet have a firm grasp on all the pros and cos of decreasing v level term. what's the most common. It seems level term is most sensible?
3. I've been offered a decreased level of payout for the critical illness (e.g. Life covers entire mortgage, critical is roughly a 1/3 or mortgage value). This cuts the premium down considerably, but given I don't know how much these critical illness items cost, I wouldn't know if I needed £100k, £200k or even more for my critical illness cover.
4. Any particular providers to avoid, or indeed you recommend?
My gut feeling at the moment is telling me to get 2x level term policies, but with a reduced critical illness cover. But given I'm totally new to this, any help or pointers would be much appreciated as I'm going to be having to make a decision in the next few days.
TIA
Ginge R said:
OP,
Bear in mind that decreasing cover might be cheaper but you may decide in a few years to buy a larger home. When/if you do, the mortgage is larger, you're older (new cover more expensive), you're earning more, smoking and drinking more, had a minor op for so something so the stakes are higher, you have more kids, you might be seperated and starting out all again (sorry!).. but you get the picture. Decreasing cover might be a false economy.
Consider Family Income Benefit (FIB) as well, and be flexible. To give you an idea, I placed some business tonight for a married couple for 25 years - early 30s, one child and the likelihood of a larger mortgage in a couple of years. She had 100k life cover, 75k CIC/SIC, 1k per month FIB, private school boarding insurance cover.. he had 600k life over, 1.5k per month FIB, IncomeProtection and 150k SIC/CIC. Both came with 25k CIC/SIC (free) cover for their baby. If baby is poorly, it gives you the option of waving a cheque and nailing treatment asap if you din't want the NHS.
Don't forget to get your policies written into trust, it should be the default starting point for every policy at outset.
Thanks for the reply, much appreciated. To give you a bit more context, I'm 37 and my partner is 33, so this house purchase is later than you would normally expect for 'first time buyers'. We're also both quite far on in our careers, so our incomes are likely to remain unchanged significantly for a few years (Combined income is now in excess of £150k). The house we're buying is in London (mortgage is well within our means), and we've both said that our next house purchase will be back in one of our respective hometowns, meaning we can get a lot more for less/same, so with that in mind it's unlikely (touch wood!) we'll need more/extra mortgage.Bear in mind that decreasing cover might be cheaper but you may decide in a few years to buy a larger home. When/if you do, the mortgage is larger, you're older (new cover more expensive), you're earning more, smoking and drinking more, had a minor op for so something so the stakes are higher, you have more kids, you might be seperated and starting out all again (sorry!).. but you get the picture. Decreasing cover might be a false economy.
Consider Family Income Benefit (FIB) as well, and be flexible. To give you an idea, I placed some business tonight for a married couple for 25 years - early 30s, one child and the likelihood of a larger mortgage in a couple of years. She had 100k life cover, 75k CIC/SIC, 1k per month FIB, private school boarding insurance cover.. he had 600k life over, 1.5k per month FIB, IncomeProtection and 150k SIC/CIC. Both came with 25k CIC/SIC (free) cover for their baby. If baby is poorly, it gives you the option of waving a cheque and nailing treatment asap if you din't want the NHS.
Don't forget to get your policies written into trust, it should be the default starting point for every policy at outset.
Does knowing any of this change/clarify anything for your advice?
Thanks again
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