There are a lot of people who think that if you have life insurance there isn’t much point in having critical illness insurance.  They also think that if you have critical illness insurance there’s no need for life insurance.  Both of these cases couldn’t be further from the truth.

There is only one reason why a life assurance policy would pay out, that being on death within the term of the policy.  Policies will often cover terminal illness and payout before death actually occurs but apart from this death is the main reason why payouts are made.  In other words, if you are diagnosed with a critical illness, a life insurance policy won’t help you straight away but at least you’ll know that you have life insurance in place.

Critical illness insurance policies pay out when you are diagnosed with a critical illness or specified dread disease.  The comprehensiveness of policies can vary but most cover at least 20 standard illnesses including heart attack, stroke and cancer.  These illnesses are usually severe or life threatening but in most cases the sufferer can go on to live for years after the diagnosis.  A critical illness policy therefore takes care of you when you are alive. 

It is fairly obvious then, that life insurance and critical illness insurance are two very different policies but they do complement each other well.  If you had just been diagnosed with a critical illness and you received your insurance claim chances are you would be going through a fairly scary time.  You and your family might just take comfort in the fact that at least  you have life insurance as well.

It used to be the case that when you took out a mortgage the bank or building society would insist that you had life insurance in place.  Why not?  This is good advice for most people.  People know this because they often still think that life insurance is a legal requirement and it makes sense to them but what about critical illness insurance?

There is a big difference between premiums for life insurance and critical illness insurance and this is the main hurdle for people to understand.  Life insurance premiums keep on getting cheaper due advances in medical science.  We are living longer and the illnesses that used to be killers are now treatable in most cases so premature death is becoming less likely each year.  Critical illness, on the other hand, covers those illnesses that used to be killers so the premiums are going up all of the time.  Cancer Research say that we all have a 1 in 3 chance of being diagnosed with cancer at some stage in our lifetimes.  It’s perfectly natural for an insurance company to want to increase premiums with statistics like these because it means that they have a 1 in 3 chance of having to make a payout.

So critical illness costs a lot more than life insurance so why then should we have it along side our mortgages?  It goes back to statistics.  The illnesses covered by critical illness policies can be life threatening but but every year that probability goes down due to advances in medical science.  The death rate for cancer, for instance, has dropped by 20% over the last 15 years.  Death rates may be dropping but we are still being diagnosed and in some cases illnesses are more likely due to our current lifestyles.

Critical illness insurance takes care of you while you are still alive.  Being diagnosed with a critical illness usually means that you cannot work during treatment and chances are that you may not be able to return to work in the same capacity after treatment.  During this time you still have to pay your mortgage.  A mortgage is the biggest longest financial commitment people usually make so why risk losing your home because you have been diagnosed with a critical illness?

Statistically critical illness insurance makes far more sense for anyone with a mortgage than life insurance.  People just need to understand why and that it is worth paying for that peace of mind where their home is at stake.

Well, last week I predicted that the final would be between Yasmina, Howard and Kate. 

Looks like I got that one wrong!

Time for a revision to my predictions.  The final will now be between Yasmina, Debra and Kate.  Yasmina still to win.

Any thoughts?

I know that this blog is supposed to be dedicated to Life and Critical Illness Insurance but sometimes it’s nice to talk about something else.  I’ve been watching the apprentice and I think I’m going to be bold enough to say who will be in the final.  This is just my opinion, I’m not privy to any more information than anyone else.

The final 3 contestants will be Howard, Yasmina and Kate.  I think Sir Alan will choose Yasmina as this years winner.

Let’s see whether I’m right or wrong.

This is a question a lot of people ask these days.  It used to be the case that anyone taking out a mortgage thought that they HAD to have life insurance.  In fact, lenders used to insist upon it and borrowers didn’t mind.  If it’s mandatory it’s got to be a good idea hasn’t it?

Buildings insurance is mandatory but people really don’t mind paying for it.  Most people add contents insurance too even though it isn’t a legal requirement.  Car insurance is a legal requirement but fully comprehensive insurance isn’t, yet most people happily pay extra for fully comp.

So, do you need life insurance?

If you are single with no dependents then no, you probably don’t need life insurance.  Critical illness insurance or income protection is a far better idea.  As you’re own your own you need to make sure that you can pay your mortgage and bills no matter what kind of accident or illness might happen.

If you are in a relationship or have a family then life insurance is a good idea but not mandatory.  You have to ask yourself, if I died could my partner afford to pay the mortgage on his/her salary?  Don’t just assume that the surviving partner will sell the property and move on.  Right now it’s difficult to sell a property and it can take a long time to find a buyer and besides, if you’d just lost a partner would you really want the stress of having to move as well? Where would the surviving partner move to and would they be able to afford a new mortgage?

If you have children ask yourself what the financial impact of your death would be?  Would your partner be able to pay the monthly bills, the mortgage and look after the children?

If you find that the answer to these questions is that yes, you need life insurance, don’t delay it any more than you have done already.  Get a quote.  Life insurance is the cheapest kind of term insurance available so it will probably cost you only pennies per day.

For a limited time only we are currently rebating 50% of our commission back into your policy which makes your premiums cheaper.

A recent article in Moneyweek said that anyone wishing to cut costs should cancel pointless insurance cover.   Payment Protection Insurance was listed as a pointless insurance policy along with critical illness cover. 

In relation to critical illness cover the author suggested that the policy sounds great but there are plenty of exclusions and cover can be expensive.  The author was absolutely correct, cover can be expensive.  When everyone has a 1 in 3 chance of being diagnosed with some form of cancer in our lifetimes it’s going to be expensive to insure against that kind of threat.  The author suggested that instead of a critical illness policy people should consider building up a disaster fund instead.

Everyone should have a disaster fund anyway but if I have a £100000 mortgage and I am diagnosed with a critical illness in 2 years time then I would want my mortgage paid off.  I would want to make sure that at least my home was my own and that my wife and children always had a roof over their heads.  A disaster fund built up from 2 years worth of savings will not do that for me so I fail to see how critical illness insurance can be considered a pointless insurance.  I hope that the premiums I pay for critical illness insurance prove to be a waste of money in that I hope not to ever be in a position where I need to make a claim. I pay the premiums each month because I and my family want security that our home will always be ours, that if I am diagnosed with some kind of critical illness I can afford to pay for immediate private treatment rather than join the NHS waiting list.

Anyone not convinced by critical illness should look at the claims settlement history if they are in any doubt as to whether the policies pay out.

To view the critical illness comparison table please click here