MegaSack DRAW - This year's winner is user - rgwb
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Thrilling subject, I know....
I'm looking to sort out the family life insurance situation while we are still not (too) old and not ill ... because it will be a lot cheaper to do it now.
Reading the moneysavingexpert guide they seem to prefer/push the level term style of cover (where you have a defined lump sum whenever you die).
They don't seem so keen on the decreasing term products (family income benefit) which pay out a regular sum for the remainder of the policy term post your death.
Given I would be buying the policy mainly to cover ongoing costs (should the worst happen), the decreasing term products seems to make more sense. (we do have plenty of savings to cover one-off costs such as a funeral)
So at the moment I am thinking it is probably best to buy two individual declining term policies for both myself and my wife, to cover outgoings up until retirement time. Maybe I would also take out a smaller level term policy each for a modest lump sum should the worst happen.
I'd be interested in what anyone else thinks / what your approach is
Regarding our financial position otherwise...secure.
Sorted for pensions and have low outgoings (no debts).
We both work, mid 40s, I am the main breadwinner. 2 teenage kids at secondary school.
We have an old declining term policy which was taken out to cover our original mortgage, but it'll be up soon and would be insufficient to cover ongoing living costs. I also have some life cover through work should I die in service (but I don't want to rely on it, should I want to change jobs, retire early etc)
My kids are all independent now so I don't have any life insurance any more. But back when they were still dependents my thinking was something like this:
My death in service benefit would have made my wife pretty well off if I died, so no real need to insure my life. We had an endowment mortgage too, so that was covered (just about!)
On the other hand, if she had died and I wanted to keep working I would have needed to pay for childcare (I worked away from home a lot) so her life was insured to give a regular income, enough to pay a live-in nanny until the children were old enough to look after themselves.
In our view this covered the major risks at minimum cost.
I have a declining insurance that pays the mortgage off should I or my wife die. We also have an old level term (that we got with our last mortgage and was dirt cheap) death and critical illness cover that we continue paying which would give us £55k. I have a work insurance which pays out 3x my salary to my wife should I die.
So as it if I die my wife gets no mortgage and about £160k. If she dies I get no mortgage and £55k but I have a good job but she doesn’t.
If my wife gets very ill we get £55k to help pay for things. If I get very ill I would be paid for a few months from work and get £55k - this is the worst situation but all it would mean would be that we’d have to sell up and get a cheaper house to have no mortgage - but only about 15% cheaper.
Basically you’ve got to go through all the possible scenarios to see what you would get in each and if you could cope. Life insurance has gotten cheaper over the last few years but critical illness cover has increased a lot in price due to people being kept alive better. My current new life insurance has no critical ill ess cover as it was so expensive for us and we had the old policy to help out. What we do have is 3 policies in total (one old one which is joint and 2 new ones) and they cost around £70 a month to me which is a lot but I think it’s worth it.
One interesting thing is that we have our life insurances with the bank we have our mortgage with. It was a little more expensive than what I found on the internet but the advisor at the bank (who we trust and was very honest with us) said that having insurance with the mortgage provider is good as it’s in their interest to pay out quickly as they have the liability of the mortgage debt AND the means to have it paid off. She said she had seen mortgages paid off within 2 weeks of an insured death but has had to try and help families try and get money from (the cheapest on the internet) other insurances who don’t seem to want to pay out and it can take months if they are particularly awkward which is really stressful for a person already dealing with grief. I’m not sure how ultimately truthful that was but it seemed to make sense to me and they didn’t cost much more at all.
It depends on what you’re trying to achieve in my view.
In our case, I’m sole earner, two kids, 8 and 12. We have a mortgage high enough that while I could manage if I was widowed, my wife wouldn’t be able to.
So, we’ve got cover with Vitality that will pay enough on either of our deaths to cover
* settle the mortgage
* provide a basic income to pay the bills and food until youngest is 21 so the remaining parent doesn’t need to work
* provide a lump sum sufficient to put both kids through uni.
The policy ceases once the youngest is 21. The idea being at that point, everyone is able to look after themselves should the worst happen. If we both die, it goes into a trust administered by my brother for the kids.
It’s a surprisingly reasonable £70 a month but it has been in place for a while now. I don’t think it would be quite so reasonable it taken currently. Oh, and the amount that it’ll pay out actually rises in line with inflation (but so do the premiums).
Do you not have anything through your employer? I know my wife gets 6x salary for death in service (plus my previous dc pension pot) which would keep her going for a good few years.
I have a couple of small fixed term policies as well worth a small amount.
Thanks for feedback...I've got a bit more thinking to do it seems
@db Yes I do have death in service benefits with work, however that can't be guaranteed should I change jobs. Better to get something in place now, before taking cover becomes more expensive as we (hopefully!) get older
We have 2 young kids and a relatively new mortgage. Took out:
Decreasing life cover (joint policy pays out if either of us die), Pays off whatever remaining mortgage there is.
Income protection cover for me - if I'm long(ish) term ill for up to 2 years it pays 50% of my monthly salary - covers mortgage costs and a bit.
2x annual salary death in service benefit from work. If I pop my clogs it covers essentially everything until the kids are out of the house. If my wife goes then it's half the amount, but I'm more able to cope on my own salary so it would cover after school clubs and suchlike so I can continue to work.
There's obviously other scenarios that could play out but what we have covers the most likely ones.
If we both cop it, the kids are pretty well set up...
Wife's always had decreasing term cover tied to the mortgage amount because we had to have it for the mortgage
Because I worked in offshore oil and gas in dangerous countries the awoooga alarm would go off when ever I got quotes so we relied on my death in service and mortgage co accepted that on the premise that I had to get cover if I left that job.
We had a kid a couple years ago and I'm now clear of going offshore for 3 years +tickets expired so managed to get level term for the next 20 years till Jnrs out the house at least for 6 quid a month