Critical illness cover - how much cover is needed?
Discussion
A friend of my wife's husband has recently had a pretty catastrophic stroke and he's only in his very early fifties and was as far as I could tell really very fit. They have three kids, the youngest of which have only just started secondary school.
This has got my wife worried about critical illness cover for if something like this was to happen to either of us. My wife doesn't work currently but if something terrible happened to her then she would need care etc. If something happened to me the family would lose it's source of income (although I do actually have various policies through work that would provide quite a lot).
When taking out critical illness insurance how do you calculate how much cover to take out?
Carers etc cost a fortune and you could potentially need them for decades - do you therefore need to insure for a huge amount?
This has got my wife worried about critical illness cover for if something like this was to happen to either of us. My wife doesn't work currently but if something terrible happened to her then she would need care etc. If something happened to me the family would lose it's source of income (although I do actually have various policies through work that would provide quite a lot).
When taking out critical illness insurance how do you calculate how much cover to take out?
Carers etc cost a fortune and you could potentially need them for decades - do you therefore need to insure for a huge amount?
Someone suffering a critical illness can have a much worse financial impact on the family than if they died.
I'm an IFA so have discussed this with clients countless times over the years and have dealt with a few claims too. I've never known anyone complain they had too much cover in the event of a claim!
As a bare minimum I would suggest that you make sure that any mortgage and other debts are covered, then over and above that you can calculate the cost of care over the years if needed. Would the partner give up work to look after the spouse? If so you may need to cover that too.
In my experience the main barrier to the level of CI taken out is the budget. What's your budget? That's normally the deciding factor to how much and the type of cover you can have (term insurance or whole of life).
I'm an IFA so have discussed this with clients countless times over the years and have dealt with a few claims too. I've never known anyone complain they had too much cover in the event of a claim!
As a bare minimum I would suggest that you make sure that any mortgage and other debts are covered, then over and above that you can calculate the cost of care over the years if needed. Would the partner give up work to look after the spouse? If so you may need to cover that too.
In my experience the main barrier to the level of CI taken out is the budget. What's your budget? That's normally the deciding factor to how much and the type of cover you can have (term insurance or whole of life).
Take out as much as you can afford.
Death is what we all fear most, but statistically it's the least likely thing to happen to us. This is why life only premiums are so cheap. The worst thing that can actually happen is that you get something that renders you permanently incapacitated or unable to return to work.
Cancer UK is the stats at 1 in every 2 people will get Cancer.
We recently had a 29 year old client who had a Stroke........he won't be returning to work.
Death is what we all fear most, but statistically it's the least likely thing to happen to us. This is why life only premiums are so cheap. The worst thing that can actually happen is that you get something that renders you permanently incapacitated or unable to return to work.
Cancer UK is the stats at 1 in every 2 people will get Cancer.
We recently had a 29 year old client who had a Stroke........he won't be returning to work.
You may wish to re-word thatEnut said:
Someone suffering a critical illness can have a much worse financial impact on the family than if they died.
I'm an IFA so have discussed this with clients countless times over the years and have dealt with a few claims too. I've never known anyone complain they had too much cover in the event of a claim!
As a bare minimum I would suggest that you make sure that any mortgage and other debts are covered, then over and above that you can calculate the cost of care over the years if needed. Would the partner give up work to look after the spouse? If so you may need to cover that too.
In my experience the main barrier to the level of CI taken out is the budget. What's your budget? That's normally the deciding factor to how much and the type of cover you can have (term insurance or whole of life).
So the initial concern was making sure there was enough money to cover these things off whilst we have responsibility for our children so I got a quote from Vitality for me and my wife for a 20 year term paying out £1m (a number I picked out of the air) and the cost was £90 a month. Which is quite a lot really.I'm an IFA so have discussed this with clients countless times over the years and have dealt with a few claims too. I've never known anyone complain they had too much cover in the event of a claim!
As a bare minimum I would suggest that you make sure that any mortgage and other debts are covered, then over and above that you can calculate the cost of care over the years if needed. Would the partner give up work to look after the spouse? If so you may need to cover that too.
In my experience the main barrier to the level of CI taken out is the budget. What's your budget? That's normally the deciding factor to how much and the type of cover you can have (term insurance or whole of life).
We have enough money to clear the mortgage and have no other debts so the concern here is being unable to work or having to pay for care.
PeteinSQ said:
So the initial concern was making sure there was enough money to cover these things off whilst we have responsibility for our children so I got a quote from Vitality for me and my wife for a 20 year term paying out £1m (a number I picked out of the air) and the cost was £90 a month. Which is quite a lot really.
We have enough money to clear the mortgage and have no other debts so the concern here is being unable to work or having to pay for care.
How old are you? I'd be very surprised if CIC (SIC with Vitality) for £1m over 20 years was only £90pm........We have enough money to clear the mortgage and have no other debts so the concern here is being unable to work or having to pay for care.
I have £85k of critical illness cover and £368k of life cover. £88 a month with Zurich. That's a decreasing plan to cover the mortgage over time, plus a lump sum on top, and covers both my wife and I with half-payout cover for the kids too.
However, where I work we have a critical illness benefit which pays 75% of basic salary in perpetuity, so in the event I was in a similar position to the OP's friend we wouldn't suddenly have zero income. I would have to look closely at those figures if I were to change employer. We also have a 4x salary death-in-service benefit, so if I were to die my wife/family would get not only the insurance money, but a chunky sum from my work too. They wouldn't starve or have to worry about a roof over their heads if I were to get seriously ill or die.
Like many people my age, I am worth rather more dead than alive, financially.
However, where I work we have a critical illness benefit which pays 75% of basic salary in perpetuity, so in the event I was in a similar position to the OP's friend we wouldn't suddenly have zero income. I would have to look closely at those figures if I were to change employer. We also have a 4x salary death-in-service benefit, so if I were to die my wife/family would get not only the insurance money, but a chunky sum from my work too. They wouldn't starve or have to worry about a roof over their heads if I were to get seriously ill or die.
Like many people my age, I am worth rather more dead than alive, financially.
Sarnie said:
How old are you? I'd be very surprised if CIC (SIC with Vitality) for £1m over 20 years was only £90pm........
I'm 39, wife is 41. Might have been £90 and was actually for 15 years. But then having said that and looked back at the quote I think it's only life insurance which I absolutely wasn't looking for a quote for. Will go and try again.... PeteinSQ said:
I'm 39, wife is 41. Might have been £90 and was actually for 15 years. But then having said that and looked back at the quote I think it's only life insurance which I absolutely wasn't looking for a quote for. Will go and try again....
My initial thought was indeed, that £90pm was life only......This is such a difficult thing to answer. You situation will be different to everyone else, whether you realise it or not.
There is, in my mind, no right answer. I've gone (going) for a combination of Life, Critical Illness and Income Protection. I had historically had a block of Life Cover (Clear mortgage and give my wife some financial space to cope after my death without having to sell the house the kids are reliant on) and a block of Critical illness cover (in the hope it would cover me should the worst happen).
However I quickly realised recently I was missing a trick. Critical illness like everything is only as good as the policy and provider, and if you get some rare unlisted illness that ruins you, not a penny gets paid out. Also some conditions wont pay out the entire amount.
For me I've (tried to) mitigate that by getting Income Protection on Named occupation that is index linked. You can massively manage the cost of that by delaying how long it is until it starts paying out (Your employer will probably pay you on full pay for "a" period, its then your choice to decide if you want to hammer savings to increase the timing).
I don't mind saying what I've gone for, but without the context of my finances, employment, home situation, its like saying I like a certain type of potato more than another.
I'm 37, and all are until 65
900k Life (Level Term)
500k Life (Decreasing Term)
100k Critical Illness (Level Term)
4k Per Month Income Protection (Index Linked, Named Occupation, 90 day delay)
Historically I had more Critical illness, less life, and no Income. They are probably the three sliders you should consider. There will be others. If you need help, get advice.
What I can say, is speak to Liam Thomas http://www.lt-mortgages.com/ (active on here). I've used Liam for Mortgages & Various insurance cover for the last 8 years. He is the only person I ever recommend for either product set, and I've never had someone come away disappointed. He also has the patience of a saint (sorry!).
There is, in my mind, no right answer. I've gone (going) for a combination of Life, Critical Illness and Income Protection. I had historically had a block of Life Cover (Clear mortgage and give my wife some financial space to cope after my death without having to sell the house the kids are reliant on) and a block of Critical illness cover (in the hope it would cover me should the worst happen).
However I quickly realised recently I was missing a trick. Critical illness like everything is only as good as the policy and provider, and if you get some rare unlisted illness that ruins you, not a penny gets paid out. Also some conditions wont pay out the entire amount.
For me I've (tried to) mitigate that by getting Income Protection on Named occupation that is index linked. You can massively manage the cost of that by delaying how long it is until it starts paying out (Your employer will probably pay you on full pay for "a" period, its then your choice to decide if you want to hammer savings to increase the timing).
I don't mind saying what I've gone for, but without the context of my finances, employment, home situation, its like saying I like a certain type of potato more than another.
I'm 37, and all are until 65
900k Life (Level Term)
500k Life (Decreasing Term)
100k Critical Illness (Level Term)
4k Per Month Income Protection (Index Linked, Named Occupation, 90 day delay)
Historically I had more Critical illness, less life, and no Income. They are probably the three sliders you should consider. There will be others. If you need help, get advice.
What I can say, is speak to Liam Thomas http://www.lt-mortgages.com/ (active on here). I've used Liam for Mortgages & Various insurance cover for the last 8 years. He is the only person I ever recommend for either product set, and I've never had someone come away disappointed. He also has the patience of a saint (sorry!).
Edited by conanius on Friday 17th September 13:36
conanius said:
This is such a difficult thing to answer. You situation will be different to everyone else, whether you realise it or not.
There is, in my mind, no right answer. I've gone (going) for a combination of Life, Critical Illness and Income Protection. I had historically had a block of Life Cover (Clear mortgage and give my wife some financial space to cope after my death without having to sell the house the kids are reliant on) and a block of Critical illness cover (in the hope it would cover me should the worst happen).
However I quickly realised recently I was missing a trick. Critical illness like everything is only as good as the policy and provider, and if you get some rare unlisted illness that ruins you, not a penny gets paid out. Also some conditions wont pay out the entire amount.
For me I've (tried to) mitigate that by getting Income Protection on Named occupation that is index linked. You can massively manage the cost of that by delaying how long it is until it starts paying out (Your employer will probably pay you on full pay for "a" period, its then your choice to decide if you want to hammer savings to increase the timing).
I don't mind saying what I've gone for, but without the context of my finances, employment, home situation, its like saying I like a certain type of potato more than another.
I'm 37, and all are until 65
900k Life (Level Term)
500k Life (Decreasing Term)
100k Critical Illness (Level Term)
4k Per Month Income Protection (Index Linked, Named Occupation, 90 day delay)
Historically I had more Critical illness, less life, and no Income. They are probably the three sliders you should consider. There will be others. If you need help, get advice.
What I can say, is speak to Liam Thomas http://www.lt-mortgages.com/ (active on here). I've used Liam for Mortgages & Various insurance cover for the last 8 years. He is the only person I ever recommend for either product set, and I've never had someone come away disappointed. He also has the patience of a saint (sorry!).
Thanks for the kind words Gareth!There is, in my mind, no right answer. I've gone (going) for a combination of Life, Critical Illness and Income Protection. I had historically had a block of Life Cover (Clear mortgage and give my wife some financial space to cope after my death without having to sell the house the kids are reliant on) and a block of Critical illness cover (in the hope it would cover me should the worst happen).
However I quickly realised recently I was missing a trick. Critical illness like everything is only as good as the policy and provider, and if you get some rare unlisted illness that ruins you, not a penny gets paid out. Also some conditions wont pay out the entire amount.
For me I've (tried to) mitigate that by getting Income Protection on Named occupation that is index linked. You can massively manage the cost of that by delaying how long it is until it starts paying out (Your employer will probably pay you on full pay for "a" period, its then your choice to decide if you want to hammer savings to increase the timing).
I don't mind saying what I've gone for, but without the context of my finances, employment, home situation, its like saying I like a certain type of potato more than another.
I'm 37, and all are until 65
900k Life (Level Term)
500k Life (Decreasing Term)
100k Critical Illness (Level Term)
4k Per Month Income Protection (Index Linked, Named Occupation, 90 day delay)
Historically I had more Critical illness, less life, and no Income. They are probably the three sliders you should consider. There will be others. If you need help, get advice.
What I can say, is speak to Liam Thomas http://www.lt-mortgages.com/ (active on here). I've used Liam for Mortgages & Various insurance cover for the last 8 years. He is the only person I ever recommend for either product set, and I've never had someone come away disappointed. He also has the patience of a saint (sorry!).
Edited by conanius on Friday 17th September 13:36
As you've said, there is almost no right or wrong solution here, it comes down to risk, attitude to that risk and then budget.
In the late 90s I had 5 x salary death in service plus a 4/9th salary widows allowance tacked on. Luckily I never told my wife, as I would have been under a bus and her in Barbados. Now we are old and grown up we have 2nd life whole cover which is comparatively cheap and will give the little darlings a chunk of cash when the 2nd of us shuffles off this mortal coil. I think these products only work because most of them will lapse for nonpayment of premium. I told my wife that once the party is over, go in the safe and find the premium payment details and keep paying….
Crumpet said:
300k of Critical Illness cover must be pricey! I think I’ve got 100k CIC joined into a life insurance policy and it’s about 80% of the monthly cost. Must be going on for £250 a month for 300k?
About £65 a month from memory. I'm an IFA myself and took it out when I was 23, which helps keep the premiums down. 50 year term. Gassing Station | Finance | Top of Page | What's New | My Stuff