Life insurance products - income protection, critical illness, death benefits, etc.

[Participant]

Hi

With a large mortgage and plenty of responsibilities, as well as the fact that I'm not getting any younger, I've come to realise that my family and I are not adequately protected if the event of our untimely demise / poor health.

I'm interested in people's opinions please on life products like the above. I've spoken with advisers (nothing fancy) and have been quoted £200 per month for death benefit (reducing in line with mortgage liability) and income protection for me and my wife until we retire.

Do lots of people have this kind of product? Or do you self insure / hope that it won't happen to you?

Interested to hear people's thoughts on if this is all just a massive con / gravy train and they'll always find a reason not to pay, or if it's essential for a middle-aged family man mortgaged to the balls, or something in between.

 

[ShadowMan]

Do you get any benefits through work?

We have death in service benefits through work plus critical illness cover but then also have separate life insurance individually that will more than clear mortgage. Idea being that in the event of a death, the mortgage is cleared and then a considerable lump sum to help with ongoing costs etc.

We pay about £60 per month for the 2 life insurance policies. These are also rising policies so rise with inflation and are lump sum for more than mortgage balance. The expensive part of insurance when we looked was private critical illness or unemployment (income) protection policies.

You need to balance what is affordable and what you need. We had some silly quotes to add loads of extras on but decided the work benefits plus life insurance was enough.

 

[Maccy]

£200 seems a lot, we have a decreasing benefit mortgage protection policy that pays out in the event of death (for either me or the mrs) at around £22/month and I have an income protection policy that pays out in the event of critical illness (deferred for 3 months), which costs £41/month. Need to look at getting the mrs one again as she's working now.

 

[Participant]

Do you get any benefits through work?

We have death in service benefits through work plus critical illness cover but then also have separate life insurance individually that will more than clear mortgage. Idea being that in the event of a death, the mortgage is cleared and then a considerable lump sum to help with ongoing costs etc.

We pay about £60 per month for the 2 life insurance policies. These are also rising policies so rise with inflation and are lump sum for more than mortgage balance. The expensive part of insurance when we looked was private critical illness or unemployment (income) protection policies.

You need to balance what is affordable and what you need. We had some silly quotes to add loads of extras on but decided the work benefits plus life insurance was enough.

Through work I get twice my annual salary on death, which would be about 1/3rd of my total mortgage liability.

£200 seems a lot, we have a decreasing benefit mortgage protection policy that pays out in the event of death (for either me or the mrs) at around £22/month and I have an income protection policy that pays out in the event of critical illness (deferred for 3 months), which costs £41/month. Need to look at getting the mrs one again as she's working now.

Our mortgage balance is currently ~£500k. Not sure what yours is but that might explain the difference in premium.

Critical illness and income protection are different, critical illness being cheaper but less comprehensive. Is the £41 critical illness or income protection?

 

[Ahleckz]

Looked into life insurance, didn't really see the point. I get 5x salary as death in service cover which will cover the mortgage now so assuming I die in the future (whilst working), it'll continue to cover it. If I die outwith employment, I plan my mortgage to be paid off. Don't see the point in paying £x for someone else to enjoy when I die. Rather spend that now.

Critical Illness cover may be worth it, will have to look at exemptions though.

 

[Semple]

£200 seems a lot, we have a decreasing benefit mortgage protection policy that pays out in the event of death (for either me or the mrs) at around £22/month and I have an income protection policy that pays out in the event of critical illness (deferred for 3 months), which costs £41/month. Need to look at getting the mrs one again as she's working now.

I suspect it's the income protection until retirement that has jacked up the OPs price.

From when i looked at them, you pay a menial amount (assuming no bad health) for basic mortgage cover in the event of death.

It then stepped up a fair bit for critical illness cover.

Then shot up even further for things like income protection.

 

[Participant]

I suspect it's the income protection until retirement that has jacked up the OPs price.

Correct, income protection makes up £140 of the £200.

 

[Maccy]

Our mortgage balance is currently ~£500k. Not sure what yours is but that might explain the difference in premium.

Critical illness and income protection are different, critical illness being cheaper but less comprehensive. Is the £41 critical illness or income protection?

Granted, yes, mortgate balance will play a part - ours is considerably less than that.
To clarify, my income protection includes critical illness.

 

[merlin]

I get paid 6 months salary if I fall ill or have an accident so I put a 6 month excess on my permanent health and it dropped the premiums nicely. Also, I opted for an 80% of usual net pay monthly indemnity limit (as if I was at home laid up I would likely save on a number of current expenses/outgoings). You don't need your gym membership if you've broke your back, etc.

 

[NotAGolf]

Me and the wife have a joint life insurance policy. It's a decreasing amount which would cover the remainder of the mortgage, plus effectively provide a sufficient salary for the survivor until the kids hit 20. We've got death in service perks at work too, but kind of ignore these as they alone wouldn't be enough to support the survivor and may change/disappear when switching jobs.

We don't have any kind of critical illness cover. That seems very expensive and a bit of a minefield with things that are/aren't covered. We save into a stocks and shares isa with the aim of using it as part of our pension, but if a serious illness caused issues we could dip into that instead.

 

[Martynt74]

£200 seems a lot, we have a decreasing benefit mortgage protection policy that pays out in the event of death (for either me or the mrs) at around £22/month and I have an income protection policy that pays out in the event of critical illness (deferred for 3 months), which costs £41/month. Need to look at getting the mrs one again as she's working now.

I believe you're similar age to me (mid 30's), and from memory the op is older so that would likely explain the cost difference. I know when i first took out a policy at 25 it was a lot cheaper than when i considered changing a few years ago.

 

[Tom_ed1987]

Interested in this too. I did speak to a life insurance broker years ago, but don't think they can't be trusted to provide proper advice & are on big commissions for certain providers.

I have the standard death in service lump sum through work (think it's 5x annual salary), and a £500k critical illness policy as an employee benefit that worked out reasonably cheap, but that might have been short sighted as if I leave the company it ends.

I've been thinking about some sort of income protection or similar too - something that pays out if for whatever reason I can no longer do my job for non critical Ill health/mental breakdown etc, but not sure that exists/is cost effective.

 

[Maccy]

I believe you're similar age to me (mid 30's), and from memory the op is older so that would likely explain the cost difference. I know when i first took out a policy at 25 it was a lot cheaper than when i considered changing a few years ago.

Absolutely, but I think even £200 is excessive. Must be able to find suitable cover for less.

 

[Participant]

I've been thinking about some sort of income protection or similar too - something that pays out if for whatever reason I can no longer do my job for non critical Ill health/mental breakdown etc, but not sure that exists/is cost effective.

It definitely exists because that's the definition of income protection products. You have to be signed off by a doctor and can't work (with varying definitions of that) whilst receiving the payments.

As for cost effective, it seems really expensive but then if something happened to me that meant I couldn't do an 'office' job, I couldn't self insure because if I could, I'd retire right now!

As for brokers' self interests, I'm not sure how you manage this as you seem to have to go through a broker to buy the product.

 

[Josh]

4x salary via work and I pay around £37 for £250k life insurance with cover critical illness thrown in where I get an immediate £60k.

Need to get some income protection sorted.

 

[booyaka]

£200 sounds high-ish but all depends on the amount of cover, your ages, health status, smoking status, job situation in terms of risk level etc. (office worker versus oil rig worker makes HUGE difference in cost)

Without further information it's difficult to say if it's good or not.

Minimum cover should be joint life, decreasing cover in line with mortgage. Then add the extra's - income protection, critical illness etc depending on budget.

 

[swillsy]

If you saved 200 quid a month and invested (not all in crypto ) you would be better off and you can see the money- the insurance providers aren't charities and they are "winning" overall. I tend to buy insurance only where you 100% have to (car/home etc) but I invest money monthly so I'm not spending it as the alternative. If you're on a good wedge then 200 quid isn't going to hurt too much but if not then you've got to ask what happens when you're 50-60 years old (avg life expectancy is 81 currently) and you've been paying someone else 200 quid a month.

 

[Surveyor]

If you saved 200 quid a month and invested (not all in crypto ) you would be better off and you can see the money- the insurance providers aren't charities and they are "winning" overall. I tend to buy insurance only where you 100% have to (car/home etc) but I invest money monthly so I'm not spending it as the alternative. If you're on a good wedge then 200 quid isn't going to hurt too much but if not then you've got to ask what happens when you're 50-60 years old (avg life expectancy is 81 currently) and you've been paying someone else 200 quid a month.

And his family are going to be pretty screwed if, god forbid, the worst happens in 12 months time.

 

[NVP]

And his family are going to be pretty screwed if, god forbid, the worst happens in 12 months time.

Not really, unless he is the only breadwinner, as they can simply downgrade their home to live within their means.

 

[MikeTheNative]

That does sound like a lot but it sounds like your mortgage and salary is probably a lot higher than mine and my gfs. We don't have income protection as my gf is a teacher so shouldn't be too difficult to find work and mortgage is coverable just about on her wage. We did it on a mortgage of 180,000 and was going to get decreasing benefit but found that the premium savings wasn't worth it, it was only a few pounds a month.