Is it life or is it critical?
Should you insure your life for the benefit of your family or your health for your own benefit? That’s an issue for many families, since while life insurance is cheap, Critical Illness cover is much more expensive and buying CI cover for two thirtysomething parents can cost five times as much as term life cover.
When CI was introduced, it was promoted as a separate type of policy. Today, because people appreciate the value of the cover, more and more young people are buying it. And insurers have adapted policies to make it more affordable. But some of the new policies have drawbacks.
For example, you need to have life assurance cover on your mortgage. Most lenders insist on this, because the last thing they want to have to do is repossess a house because a widow can’t afford the mortgage repayments. You can get a CI-plus-life insurance policy instead of straight life insurance. But some of these policies, in order to make the premiums affordable, pay out only one benefit. So if you were diagnosed as having a critical illness, you’d get the payout. You’d probably want to use at least some of the cash to support you in your illness - so your family would be left with some or all of the mortgage after your death. But CI-plus-life insurance paying a double benefit is a lot more expensive.
If affordability is the issue, then you can look at another solution, which is buying life insurance and an income protection plan, which pays a tax-free monthly benefit up to a set age (often 65) if you suffer any form of illness that prevents you from working. Because it doesn’t pay a lump sum and most people recover, premiums for this type of cover give you a lot more bang for your buck.
