Life Insurance.. ?? ?

Heliospherez · 15 Mar 2008 at 18:24

Am currently paying £25 / month for Life Insurance for me and the Wife.

Also pay £11 a month mortgage protection (critical illness only - and not unemployment)

Total £36 a month (which I have been stupid enough to pay for the last 10 years) - Over £4000 since we took these out - simply for peace of mind.

Now, bear in mind me and the wife both work for a company that pays 4 times our wages on death (if still employed with them)

So - Is this monthly cost about average, as I have checked online with various other life insurance firms, and for £100,000 (paying out on either of our deaths) cover over 25 years, the quote is coming in around £12 a month (with no critical illness, which my business friend has recommended I stop, as it's almost useless these days)

HangTime · 15 Mar 2008 at 20:46

We were paying about £35/month for life/critical illness (both) mortgage protection and unemployment (her only). Fairly expensive but then we've both had parents die at a fairly young age. I'd say around £20/month or so is probably average but do some searching on moneysupermarket etc.

Cancelled it last month following a re-mortgage as we are much more financially secure now than when we bought the house. As in your case, many employers have a 'death-in-service' type benefit and the way I look at it, people can either be in one of two situations:

1) You are financially secure enough that you don't need the big £100k or whatever payout, the surviving parter will be fine anyway
2) You are not financially secure enough to be able to keep up mortgage repayments, pay for funeral, bring up the kids etc with just one person. In which case, you must be relatively short of money and thus paying out a hefty sum each month isn't helping!

I can understand why so many people go for life insurance because it offers peace of mind more than anything. But from a purely financial perspective, unless you shop around for a good deal it can be just another unnecessary expense which is reducing your enjoyment of life! Let me put it this way: most people are going to be pretty miserable if their partner dies and no amount of zeros on a cheque is going to make things go back to the way they were.

Goksly · 15 Mar 2008 at 23:04

Check sites like moneysupermarket.com?

Foghorn Leghorn · 15 Mar 2008 at 23:51

HangTime said:
most people are going to be pretty miserable if their partner dies and no amount of zeros on a cheque is going to make things go back to the way they were.

True, but you'd be even more miserable if you had to sell your home too as you couldn't afford it on one wage.

Critical illness cover is a joke, the list of acceptable illness is usually very small. If you do still require this kind of cover then look at income/permanent health insurance.

Fog

LordSplodge · 16 Mar 2008 at 11:44

HangTime said:
1) You are financially secure enough that you don't need the big £100k or whatever payout, the surviving parter will be fine anyway
2) You are not financially secure enough to be able to keep up mortgage repayments, pay for funeral, bring up the kids etc with just one person. In which case, you must be relatively short of money and thus paying out a hefty sum each month isn't helping!

I can understand why so many people go for life insurance because it offers peace of mind more than anything. But from a purely financial perspective, unless you shop around for a good deal it can be just another unnecessary expense which is reducing your enjoyment of life! Let me put it this way: most people are going to be pretty miserable if their partner dies and no amount of zeros on a cheque is going to make things go back to the way they were.

If I die the wife gets a big payment from my employers but it won't pay off the mortgage. I she dies I get no payout from her employer but could carry on as normal but will have less money as I will have to absorb her bills and pay for her funeral.

Having Life Assurance isn't just for those on the bread-line you know? By shopping around you can pay a small sum each month and not have to worry about funeral expenses and your mortgage payments at a time when your world has just collapsed around you.

It certainly isn't bad financial advice to have life assurance and it is bad financial advice not to have it, especially if you have a fairly big mortgage.

Life Assurance can be had for less than a tenner a month and that is about two rounds of drinks so hardly a big impact on your lifestyle, is it?

Heliospherez · 16 Mar 2008 at 12:56

But thats the thing.

We will both get enough to pay off our mortgage and survive well enough if either of us dies with our employer.

And we have considerable savings already which the remaining spouse can use to pay for stuff and pay for funeral etc if one of us dies early.

So why am I paying £35 a month for peace of mind ? When I could be paying £10 or nothing a month. I'm just giving my money to a company with the 75% chance I will never need it - and never see the £20,00 I will pay into it.

From what I can see - I don't really need to be paying this amount anymore. Maybe 10 years ago yes, but now - if something happens, we have other options.

Brum Man · 16 Mar 2008 at 13:06

Foghorn Leghorn said:
Critical illness cover is a joke, the list of acceptable illness is usually very small.

Yes, heart attack, stroke and cancer effect almost nobody's lives.

Like you say, the types of cover come down completely to individual circumstances and what might be right for one person may not be needed for another.

Heliospherez · 16 Mar 2008 at 13:25

Most Critical Illness policies no longer pay out for cancer, and most only pay out after x amount of months usually when it's too late. Same for Heart attacks - if it's related to your lifestyle or you have something on your medical records that wasn't highlighted, they refuse to pay.
Stoke might be usefull, but in reality - very few strokes occur in people under 55.

Most never pay out if it can be proved you used to smoke, your job is a contributing factor, or your lifestyle.

And the total permanent Disability part is worthless. Total means total and permanent means permanent. Very few fortunately ever qualify. With this part too, they usually only pay out after 6 months - 1 year.

neocon · 16 Mar 2008 at 15:10

divosuk said:
But thats the thing.

We will both get enough to pay off our mortgage and survive well enough if either of us dies with our employer.

And we have considerable savings already which the remaining spouse can use to pay for stuff and pay for funeral etc if one of us dies early.

So why am I paying £35 a month for peace of mind ? When I could be paying £10 or nothing a month. I'm just giving my money to a company with the 75% chance I will never need it - and never see the £20,00 I will pay into it.

From what I can see - I don't really need to be paying this amount anymore. Maybe 10 years ago yes, but now - if something happens, we have other options.

whats the point of life insurance?

the average person in this country lives to be 75, if you die aged 70 of (cancer, heart attack, or something) will your wife get a pay out?

Brum Man · 16 Mar 2008 at 15:42

neocon said:
the average person in this country lives to be 75, if you die aged 70 of (cancer, heart attack, or something) will your wife get a pay out?

It depends what type of policy you have, ie whether it is term or of whole of life policy. And the point in life cover varies from person to person, it may be to pay off a mortgage and not leave the remaining party on it struggling to pay it or having to move out as they cannot afford to keep up the monthly payments, or if it's a person with dependents it may be to leave a lump sum to provide extra support for children where the loss of one income many cause their lifesyle to suffer.

And for the point that most CIC policies no longer cover cancer that is factually wrong as almost do, I'm not going to say all as no doubt you'll find one that doesn't, although it does have to be of a certain serverity which has always been the case. It is just that some companies have changesd the level of severity that it needs to be to reflect the advances in treating cancer.

Again, most don't refuse to pay if you used to smoke, only if it was in the last 12 months and you don't inform them of it when the policy is being underwritten. And yes your job and lifestyle are all factors, you are aware that policies are underwritten to take these in to account and are reflected in your premium? It's the same with ALL insurance whether personal, commercial or household that all contributing factors are taken in to account to determine how much it is going to cost you based on the likelyhood of the policy paying out.

Divosuk, it seems that you are making all of your assumptions about 'most' or 'all' of policies and based on complete hearsay with no actual facts or pay out claims history to back any of this up, with a lot of your information just being plain wrong.

HangTime · 16 Mar 2008 at 16:05

@LordSplodge:
I did put several caveats in my post, namely that people are either financially secure enough to pay for everything including mortgage/funeral etc, or they need to "shop around for a good deal".

The OP has stated that both spouses would provide 4x salary to the other if they died (presumably plus any savings/assets they may have) so my feeling is that maybe he is right that he doesn't need to be paying out £36/month anymore and should be looking to cut this down.

Don't forget that having to sort out a life insurance / critical illness claim is just another hassle and thing to deal with following the event.

Heliospherez · 17 Mar 2008 at 00:40

Thank you Hangtime.

Thats exactly the way I would see it.... The last thing I would want is to sort out is something as trivial as an insurance claim, if the other half passed away before her time.

If my missus died before me.... money would be the last thing I would want. And a measly £100,000 for a life without her would be a kick in the teeth.

Money means nothing compared to life. And if I had to find it some way, I would work 90 hours a week to feed my family.

Foghorn Leghorn · 17 Mar 2008 at 00:53

Brum Man said:
Yes, heart attack, stroke and cancer effect almost nobody's lives.

Like you say, the types of cover come down completely to individual circumstances and what might be right for one person may not be needed for another.

Yes and a lot of people recover well from them too, and for all those that do the policy wouldn't pay out a single penny.

I think you need to look closer at the restrictions involved with a critical illness policy. There are in most cases severe restrictions, having a heart attack doesn't automatically mean you'll receive a payout from your policy. The same goes for a stroke, there needs to be permanent neurological damage before a claim will be considered. In the case of cancer these are not covered until they become malignant, even in the cases where surgery is required (mastectomy etc)

For the three cases you've mentioned you would require a reasonable amount of time off work to recover but non of them would be covered under your critical illness policy unless you met the terms and conditions of your policy. If you didn't recover fully then you MIGHT meet the t+c's, but the process of claiming is a lengthy one, the insurance companies don't like parting with their cash.

Permanent health insurance also has its restrictions, such as aids, self inflicted injury, alcohol/drug abuse etc but is used as long term income replacement.

You could take out both policies to cover most bases, depends on your needs. I've seen several IFA's over the years, all recommended PHI over CI.
I don't bother with either, just got to make sure I snuff it rather than lingering on

Fog

stoofa · 17 Mar 2008 at 00:59

I don't think anyone is trying to put a value on a life.
However if the unexpected happens then it is sensible to make sure that anyone you leave behind is as well off as possible.
My dad died well before his time last year (aged 60) and thanks to his insurance and wise pension choices my mum is financially secure.
Would she give it all up if she could have my dad back?
Without a second thought, but she can't so at least she is going to be OK through her old age.

The wife and I are well sorted out.
We have a joint policy on the value of our mortgage, that is should one of us die then the mortgage will be paid off for the other person.
So should the worst happen we know that a roof over the head of the other is nothing to worry about.
At work we both have death in service at 4x our salary which would have course sort out the immediate bills and money owed etc.
Finally we have another joint policy - should one of us die then the other will get £100k.

Of course neither of us wants to have to make these claims - we've both decided we're going to live until we're 100, so we've got plenty of time ahead.
However nobody plans on dying or getting killed - providing for people you leave behind is the only fair thing to do.

Brum Man · 17 Mar 2008 at 08:07

Foghorn Leghorn said:
Yes and a lot of people recover well from them too, and for all those that do the policy wouldn't pay out a single penny.

Again, wrong. CIC policies pay out at the time of diagnosis, they don't then come and take back the money if you recover!

That is the whole point of Critical Illness cover, it pays out a lump sum on diagnosis to either help pay off your debts or support you while paying for treatment, or both. Level of recovery has NOTHING to do with the payout, as it would have already paid out by that point.

I'm not going to go in the the exact restrictions on each policy as they differ so much from policy to policy, but as said they have always had them you just need to know what they are.