life insurance

totally confused

1 to 20 of 28 messages
02/04/2013 at 14:00

I've posted this on a financial forum too but seeing as RW is a font of knowledge I didn't think it woudl hurt to get some opinions here too. 

I bough my house 6 months ago and turned down my mortgage lender's offer of life insurance as I wanted to shop around. I am still shopping around and am totally baffled by the options and jargon- I have no idea where to start. Seeing as I am not married and have no children all I am really looking for (i think) is critcical illness cover. However, this seems to be the one thing that people say not to be 'tricked into'. Surely this is what I would want to take care of martgage payments if I was too ill to continue working? Brief basics on my circumstances- secure job (teacher) and no long term health issues. 

Any advice/suggestions as to what type of policy i should go for. Any to avoid? 

 

Thanks in advance! 

02/04/2013 at 15:13

I would be very wary of critical illness policies as they have very bad press. They are possibly better regulated now though. Be aware that if yo do take out critical illness then payments only cover the interest and not reduce the capital (at least that used to be the case not sure if still is). You say you aren't married but do you have a partner and if so could you pay the mortgage and live off one salary. If you don't then you maybe right re critical illness policy. If you go down that route please be very careful and disclose full medical history to the insurance company. May even be worth talking to your GP about it as you will have to give permission for insurance company to access your records.   

What are terms and conditions for long term sick in your current position? For example mine are 6 months full pay then 6 months half pay. If yours are similar you need to take that into account as to whether you think that 6 months off is likely.

Do you have relatives? These are the people who would benifit from life insurance if you died as they would inherit the house which would have been paid for by the insurance.

02/04/2013 at 15:26

Are you in the occupational pension scheme? Mine has life insurance included. If I fall off my perch my nominated beneficiary gets four times my annual salary.

If you are, check for something similar.

Pudge    pirate
02/04/2013 at 15:35
groovy wrote (see)

I would be very wary of critical illness policies as they have very bad press. They are possibly better regulated now though. 

Are you confusing critical illness policies with payment protection insurance?

Miss Johnstone - you are right in that there is a huge range of products and policies to choose from.  To choose the right one, full consideration needs to be given to your personal circumstances, current wealth/income etc, financial commitments (i.e. mortgage), etc etc.

This is more than can be achieved on an online forum.

I would suggest that you seek advice from an INDEPENDENT financial adviser.  They will be able to establish precisely what you need and advise accordingly.

You may end up paying for the pleasure, but you will end up with a policy fit for purpose, rather than one which isn't.

02/04/2013 at 15:37

life insurance is only worth paying for if you have dependants that you want to ensure are catered for financially if you pop your clogs prematurely - otherwise it's a waste of money as you'll never see the benefit of what you're paying for.

and as said, mortgage payment protection insurance may be more relevant to you so check with an IFA

Edited: 02/04/2013 at 15:38
02/04/2013 at 16:36
+1 for seeking independent advice

We have life with critical illness on our policy. Like you, I'm a teacher and do have decent sickness pay should I need it. However, the critical illness bit pays out should you have a serious illness & this is far more likely then dying within the life of your mortgage.

For me it also gives options for the worst case scenario. If I did have a time limit on my life I could choose what to do with the money pad out.

Another consideration is that the earlier you get the cover the cheaper it is, so worth investigating & shopping around.
02/04/2013 at 16:39

http://www.unbiased.co.uk/

The above website will give you a list of IFAs in your area - If you have no dependents then life cover isn't possibly relevant - Critical Illness would pay out a lump sum in the event of you being diagnosed with a critical illness which may not be life threatening but would change your life - Speak to an IFA because a lot of companies offer them, but some have a more extensive list of critical illnesses than others.  You were correct in turning down the mortgage companys offer as it is possible they are tied to one companies product where as an IFA will advise on the 'whole of market' Also when you speak to an adviser, the first meeting should be free and they should be remunerated via commission rather than you having to put your hand in your pocket. There is a lot of publicity surrounding PPI but this is completely different to CI plans. Also as far as life cover is concerned, and as a member of the teaching profession I think your pension scheme would have death in service cover - you would need to speak to the scheme administrator about this, or it should be in your members booklet.

As someone else said you do have to disclose absolutely everything and even if you or the IFA don't think it is relevant disclose it anyway the insurance company underwriters can then decide if it is relevant - if you disclose it at the start then any future claim should be paid.

Yes there is a lot of adverse publicity about insurance claims (and I am thinking of one in particular) but for every photograph in the paper of a sad looking family there is a case of non disclosure in the background.

Hope this helps.

02/04/2013 at 16:44

(sorry RW Towers just realised I have posted a link in my previous post - so sorry if that is against the law but was just taking the idea of the forumite getting independent advice a little bit further - I have no link to the website It was just something I got from the Financial Services Authority website)

02/04/2013 at 17:11

I thought that the main reason that mortgage providers also offer life insurance is that having a policy is a condition of your mortgage agreement. They want to make sure their mortgage will be paid off if you die before you've finished the payments. So I think you might have to prove that you've got a life insurance policy somewhere to satisfy that condition, even if what you really want is critical illness/payment protection insurance.

I don't have a mortgage though, so I'll defer to someone with more experience!

Edited: 02/04/2013 at 17:13
seren nos    pirate
02/04/2013 at 17:13

grendel.you can do links......

if you are a teacher in a permaneb=nt job then most of the payment protection / critical ins would not really be needed.......

you have a good sick pay scheme taht will cover most illnesses..........if you had a serious illness then you would probably be retired off with a good lump sum.......

i would talk to an independent source......as so many of them have so many exclusions and weill only pay after so many months and would not pay out on redundancy if there were any chances that you might have known about any redundancies

02/04/2013 at 17:33

Thanks everybody! Very useful advice, I'll phone me employers tomorrow and then an IFA before making any decisions. All part of being a grown up I guess 

02/04/2013 at 17:36
xine267 wrote (see)

I thought that the main reason that mortgage providers also offer life insurance is that having a policy is a condition of your mortgage agreement. They want to make sure their mortgage will be paid off if you die before you've finished the payments. So I think you might have to prove that you've got a life insurance policy somewhere to satisfy that condition, 

not quite - it's not compulsory as many seem to think, it's purely discretionary, and may depend on the type of mortgage a person has. the mortgage provider has an ultimate sanction called repossession if you can't meet your mortgage payments which may be caused by death or other reasons.  your mortgage isn't discharged until it's fully cleared so the provider still retains title to the property during this period.  so it's really down the individual how they want to play this matter.

 

 

seren nos    pirate
02/04/2013 at 17:44

the mortgage companies can and do insist that you have building insurance as they need to protect your interest.......

but life insurance is optional

02/04/2013 at 18:44

MJ - typical bank I'm afraid, in that they're more bothered about making money out of you rather than advising you what's best. Life cover fine if you wanted to leave a property free of any debt to your next of kin, but as already said, you get death in service, and they're not teh most cost effective anyway.

Critical illness cover (CIC) pays out a lump sum if you're diagnosed with one of a list of critical illnesses and fit the definition. However, bottom line is that if you're off work long term ill, it could be another reason than a critical illness, so long term sickness cover, which pays out after a deferred period until retirement is the bottom line, followed by CIC if you want to afford it. Life & CIC combined can be cheaper than stand alone CIC, but as already pointed out above, best to get local IFA to look at this for you and get full recommendations after they've assessed your situation. Don't do it through teacher's assurance website. Nothing against them please note, but they only work with a few companies (Exeter for your income protection, a number of companies don't like teachers as you're a high risk for long term illness apparently!), get full independent advice.

02/04/2013 at 18:45

OK - 100 lines for spelling 'the' wrong.

03/04/2013 at 15:22

Pudge.

No I think that after a few kickings by insurance ombudsmen and the courts these things are now possibly better regulated. It is, however, self regulation which is why I would still be very wary of these policies 

03/04/2013 at 16:26

groovy:  the insurance companies and IFAS are certainly not self-regulated and have been for years. The level of regulation far outweighs what other financial institutions have to comply with, Banks and Estate Agents come to mind.  The case that has been in the press recently a young guy died - his insurance company refused to pay out on his criticial illness plan - but the fact was, he didn't disclose an important medical fact either to the IFA who arranged the cover, or more importantly  to the insurance company. The tragedy of that case was that had he disclosed the information it is likely the insurance company would have accepted the application albeit with a higher 'loaded' premium and his family wouldn't have been put through what they were put through.

 

Pudge    pirate
03/04/2013 at 17:26
I suspect that's not how the Daily Mail reported it though.
03/04/2013 at 18:01

I used to work in financial services. A bit of a waste of time quite frankly. Invariably what you have is plenty of talk with some individual who sort of knows they need something but is hell bent on the stance that you the advisor are trying to rip them off in some way.

The idea that you are paid via commission seems to be an issue since they don't like the idea of paying someone directly for anything. The fact that they buy a pair of shoes from a retailer for £100 of which a good chunk is profit for the retailer seems to pass them by.

So the end result is that nothing is done at all. No life insurance, no pension, nothing. But rest assured they are happy because they absolutely know they didn't lose out to a con man. Who was actually doing them a favour.

Until they want it. And its too late! 

 

 

03/04/2013 at 20:43

RicF - that sums it up and yes Pudge exactly how the Daily Mail sold the story to the world - sad family faces (and yes I do know quite a lot about the case!!!)

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