Life Insurance

[BYTEr]

Hi all,

Me & my wife are looking to purchase a joint life insurance policy (or should we get separate policies?), but not 100% sure on a few things so looking for peoples opinions.

I'm 29, wife is 30, we have 1 small child, medically pretty clear other than the wife taking low dosage medication for depression, we also currently have a mortgage of around 180k.

The main query I have is for how long should we take it out and for how much? Reading some guides etc they're suggesting as long as 30 years and 10x your current income, however, who knows how much we'd want to be leaving then or indeed how much would it even be worth in 30 years.

I know the older you are, the more expensive it would be generally but would it be stupid to get a much shorter policy, say 5 years, then we can reassess again even if it might be a bit more expensive?

Any opinions or advice would be greatly appreciated.

Thanks in advance.

 

[m@rty]

Did your wife suggest you get life insurance? Best sleep with one eye open

 

[eviled]

Option A) take a policy to cover the mortgage, this will usually be a decreasing policy for the length of the mortgage. Ie starts with 180k and that decreases in line with you remaining mortgage, so no much cover towards the end but always enough to completely pay the mortgage off. This option is usually quite cheap.

Option B) take out a policy for a fixed amount for a set term. Ie 180k should anytjing happen to you in the next 20 years. More expensive but obviously more cover.

there are other options but these were the main 2 as I saw it when I took mine out.

Joint policies will only pay out once if you and you wife both die, where as separate policies will pay out each of you both die (grim I know!)

I was almost exactly in your situation a few years ago. I took out fixed cover for 8 times my salary, for 25yrs. So my youngest would be out of full time education. It’s a joint policy as worked out slightly cheaper.

There’s plenty more knowledgeable people on here so I’m sure they will chime in

 

[[FnG]magnolia]

The insurance industry is under some scrutiny at the moment (when is it not?) and one of the policy types receiving particular focus is life insurance, specifically the principal behind it from a customer's view and the likelihood of that policy meeting the customer's requirements regarding actual versus perceived cover, payouts (refused or delayed), carve outs from payouts (exemptions a.k.a. 'not covered mate, see ya'), and other matters which should give you pause. A good starting point may be to consider what you think the life insurance policy covers you for and why you want it and then look at the granularity of any policy wording.

 

[NotAGolf]

My wife and I recently re-did our life insurance since having 2 kids. We got a decreasing term life insurance.

I can't remember the exact details, but we tried to work it out such that if one of us died tomorrow, the payout amount would be large enough such that the other wouldn't have to work again until the kids were 18. After that point, the payout was much smaller, but still enough to cover the mortgage, then when we got nearer 50, the payout would be pretty much nothing.

 

[Arsonist]

I've very recently taken out a policy myself. Just had my first baby with my partner so felt it prudent.

Cover of 200k to cover mortgage (also get 200k from work benefit to make up the shortfall). I don't actually have a mortgage yet but looking at the moment, and many prefer a life insurance policy anyway. This would also see my partner not have to worry immediately or worry about where the next cheque is coming from. 30 year policy to cover 30 year mortgage and giving my son some stability.

50k critical health taken out too which would cover me for 2 years if I got sick to recover hopefully.

All for about £21 a month. I won't even notice it go yet it'll provide massive peace of mind.

 

[FoxEye]

The insurance industry is under some scrutiny at the moment (when is it not?) and one of the policy types receiving particular focus is life insurance, specifically the principal behind it from a customer's view and the likelihood of that policy meeting the customer's requirements regarding actual versus perceived cover, payouts (refused or delayed), carve outs from payouts (exemptions a.k.a. 'not covered mate, see ya'), and other matters which should give you pause. A good starting point may be to consider what you think the life insurance policy covers you for and why you want it and then look at the granularity of any policy wording.

It goes without saying that, since everybody dies, life insurance policies must either pay out less than you pay in, or have a shed load of clauses / reasons not to pay out.

Some of those reasons include missing a payment after you're dead. Not even kidding

If you miss a payment (due to being dead) and nobody notifies the insurance company before your next payment is due, that has been known (in real life cases) to void the policy.

Seems you'd be better off just paying into a saving account.

 

[Pipe & Slippers]

Seems you'd be better off just paying into a saving account.

Don’t think there are many folks with hundreds of thousands in the bank to be able to self insure

OP - get loads why you are young, and for a long term. It’s dirt cheap
Don’t be in the situation of one of my friends. His younger brother died at 47, sparking him to review his life insurance. He only had £50k cover, and is unable to get a new policy because of health issues. 2 young teenagers and a whopping mortgage leave his family unnecessarily exposed

 

[CaptainRAVE]

Seems you'd be better off just paying into a saving account.

If I could save that much that quickly I wouldn't need a mortgage or life cover.

 

[xb8browney]

We've got decreasing cover with Aviva and we paid alittle extra to cover more types in illness

 

[NVP]

Ask yourself why exactly you want Life Insurance? Do you actually need it? Is there better use that money could be put towards?


Life Insurance is something which you're locked into for life, as you'll only get the benefit if you die, if you cancel you've lost all which you could have invested elsewhere.


If you die could your wife afford the mortgage and kid payments? No? Well then could she down grade and move in with family (like most people would need to do) yes? Then you've just saved a fortune on unnessearry payments.


Kids are expensive so you'll be best keeping as much income as you can. Just have a proper think, don't feel like its the only answer or it's just something everyone does.

 

[Haggisman]

I have 2 policies

One decreasing to cover the mortgage (costs about £5/month), another on top which stays level (well increase with RPI) including critical illness to cover everything else.

The other thing to consider is making sure you have an up to date Will. No point having the life insurance if the money doesn't go to your family anyway! Obviously different for you if you're married (we aren't) but still worth having in place.

 

[Pipe & Slippers]

Ask yourself why exactly you want Life Insurance? Do you actually need it? Is there better use that money could be put towards?

Almost certainly not

Life Insurance is something which you're locked into for life

No you are not, you can cancel at any time

if you cancel you've lost all which you could have invested elsewhere.

In this instance the benefit is peace of mind

If you die could your wife afford the mortgage and kid payments? No? Well then could she down grade and move in with family (like most people would need to do)

If you could predict your dependents' circumstances and family circumstances in 20 or 25 years' time you should be playing the stock market

Kids are expensive so you'll be best keeping as much income as you can

Live within your means and one of those costs would be life cover for most people

Just have a proper think, don't feel like its the only answer or it's just something everyone does.

Agree with this, but most people do take life insurance if they have dependents

#multiquoterage

 

[EddScott]

If it's a single life policy, as well as having an up to date will, it's good practice to create a trust at the same time. Typically discretionary.

Saves Having to wait for probate (or letters of administration if no will)

We had one small mortgage back in 2012 and individual life assurance with critical each. GF diagnosed with terminal cancer so policy paid out under terminal rather than critical. Enabled us to buy a house more suited to her needs.

It's a waste of money until you need it.

 

[NVP]

Almost certainly not

Please say why you think it's necessary? Peace of mind can be had by knowing other safety nets are there such as down grading etc.

No you are not, you can cancel at any time

The whole paragraph provided clarity on my statement, I mentioned you could cancel but doing so means no pay out.

In this instance the benefit is peace of mind

Again, peace of mind can be had in other ways.

If you could predict your dependents' circumstances and family circumstances in 20 or 25 years' time you should be playing the stock market

Exactly why squandering on non-essentials isn'tthe best idea.

Live within your means and one of those costs would be life cover for most people

Why should it be?

Agree with this, but most people do take life insurance if they have dependents

Life insurance to cover the mortgage on your house is non-essential to me as changes can be made to lifestyles and assets, life insurance that covers you until death with a guaranteed payout for your family is too expensive for most. With both extremes being pointless why tread in middle ground?

Critical illness cover for self employed is beneficial to a degree.

 

[GravyMonster]

Having been through the process of claiming on life insurance for critical illness, I'd absolutely recommend Scottish Widows. Upon receipt of our claim they contacted the relevant doctors to confirm the diagnosis and paid out within 3 days. While it wasn't our main concern at the time, it helped a lot in what was a very grim period for my family.

 

[Pipe & Slippers]

Snip

You don't believe that Life Insurance has value, I do

 

[Haggisman]

Life insurance to cover the mortgage on your house is non-essential to me as changes can be made to lifestyles and assets, life insurance that covers you until death with a guaranteed payout for your family is too expensive for most. With both extremes being pointless why tread in middle ground?

I guess ultimately it comes down to whether you think the massive disruption to your family's life due to having to downsize, the worry of a significantly reduced income, and having to adjust to being a single parent, with all the extra costs and difficulty etc. that brings (e.g. additional childcare etc), all on top of dealing with your death at the same time, is worth saving less than £20/month!

 

[GravyMonster]

Exactly that. I would never advise anyone to go without life insurance after what happened to us. For the price of a decent takeaway a month, it's an absolute no-brainer.

 

[Jimbeam3678]

This thread is a prime example of why independent financial advisors exist