Tell me, how does a business model where you take ~£10-£30 pm per customer, and pay out "hundreds of thousands" per claim, how does that work, when every single policy holder will have a guaranteed claim at some point?
Life Insurance
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That's why whole of life /guaranteed payout insurance is significantly more expensive than fixed term.
Fixed term is basically a gamble that you're going to die within the term - most people don't, so there's only a payout for e.g. 1 in every 100*. If all of those 100 people pay £10/month for a 30 year policy to cover £300k, that's £3.6k each, or £360k for all 100. Minus the £300k for the one claim and the profit is £60k.
Whole of life on the other hand is more like a savings account which you (or rather your next of kin) can only access when you die. By the time you reach "average" life expectancy, you'll have covered the payout (and any profit). If you die earlier, you win, if you die later you lose.
This is also why it's cheaper when you are younger
*numbers pulled out of my **** for simplicity.
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Can't tell whether you are being serious or not
Every single policy holder will not have a claim since most Life Insurance is term based
So in the OP's case, he'd probably be looking for a 25 or 30 year term, and if he lives beyond that, no payout
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Just re-read the thread - all the advice I've ever seen has been to not mix up life insurance and savings in a Whole of Life type policy
You either want life insurance or savings or both, and a Whole of Life policy is not the best way to achieve both
You either want life insurance or savings or both, and a Whole of Life policy is not the best way to achieve both
Life insurance is very much a personal choice. If you're happy for your wife + kids to have to move into a grotty 1 bed flat because your wife can't afford the mortgage payments, then that's something you just have to live with if you die early.
Most customers will go for a policy that covers their mortgage, which means when the mortgage has been paid off, the policy comes to an end. You can go for fixed lump amounts if you die before 60, or choose fixed lump amounts if you die before 100, obviously the more likely the policy will have to pay out the more expensive it becomes.
I always find the concept a bit weird actually.
I mean perfectly acceptable to get decreasing cover to pay out for any mortgage costs etc. But to buy a policy that pays out a lump sum upon your death (which if dying of old age would mean you've likely paid out tens-of-thousands for this policy) just seems a bit strange.
I do have a question for some of the more knowledgeable members on here / or those who have done this... If you have a mortgage of say 250k, and you pay for decreasing life cover. If after 10 years you decide to move (125k left on mortgage) and buy a bigger house, increase the mortgage amount (275k). Assuming you ported the mortgage rather than paid up and took out a new one, what would happen to the life insurance policy? Would this now only cover the 125k and require you to get a new policy to cover the remaining 150k.
Life insurance whilst young and healthy is relatively cheap, whereas if you need to take out a whole new policy for 275k when you're 10 years older, it's likely to cost significantly more. Which then begs the question of do you just take out a fixed level term? Over-predict what additional mortgage you would have later in life, and take advantage of the cheaper costs due to young age?
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Yes, providing that the level of cover on the first policy tracks your outstanding mortgage balance exactly
That's what I did. When you are young and healthy there is no hassle getting life cover and it's very cheap. As you age, the costs increase (seemingly) disproportionately
As my tale earlier, you don't want to be in the situation where you get refused cover later in life. The moment that happens, you've no options. You never know when you health may not be brilliant, so while it's good, grab all the cover you think you may need. Virtually any medical condition will increase the cost
This thread is a prime example of why independent financial advisors exist
Very true - but with the cheap and easy access to online policies these days, I have barely recommended a life assurance policy in years.
I do deal with a few cases where people have been declined on medical grounds etc as I have access to a number of decent providers/underwriter's who will "pre" approve the cases to save the hassle of multiple applications.
@OP - 10x salary was an "industry" standard thing to consider as a starting point.
Lots of options out there - Critical illness is important but expensive. Get it whilst you are young and it's not so bad cost wise.
Generally consider life cover for the length of your mortgage and/or till you expect your youngest child to be around 21/23 age and no longer a financial dependent (when are they not these days!!)
There is no right or wrong amount to have - it's also about affordability as well.
I have a small Life & CI plan from my first mortgage (£60k level cover till 60) - costs me peanuts (£9 a month!!)
Then I have an increasing Life cover circa £350k currently with £100k CI cover - cost goes up about £2 a year as does the life cover element (increases by RPI/CPI) - would easily clear the mortgage with a good lump sum left over for family.
Worth also checking if your company/employer runs any kind of death in service scheme etc.
How expensive are your mortgage payments?
What're the chances you'll die before you finish paying off your mortgage? Pop £20-30 a month into that.
As we've only just got onto the property ladder - pretty expensive! But it's perfectly manageable with two full-time salaries, it's just the "what-if" if that was dropped to one salary.
Hopefully very low, but even if i popped £30 a month in for the duration of my 35 year mortgage that'll only give 12.6k which is only a fraction of the cost of the property.
Yes granted it's not so much of an issue when you're down to less than 50%, as mortgage payments become much more affordable. It's the gap from 80/90% down to 50% that would put you in a tricky situation if you were suddenly faced with paying the mortgage on your own.
maybe silly but check to see if this is available as a work benefit. My employer covers me 10 x salary plus I can pay for extra cover and get my wife covered for a certain amount very cheaply.
In my head it's a no brainer if you have a big mortgage, kids and a wife.
My only concern is that half the time I think my wife would prefer the money to me but Ive been with her over 20 years so I cant blame her
In my head it's a no brainer if you have a big mortgage, kids and a wife.
My only concern is that half the time I think my wife would prefer the money to me but Ive been with her over 20 years so I cant blame her
This. £12.6k... you've covered your funeral costs... what about the mortgage?
Actually this thread has just prompted me to review my cover, given that we've just had another baby. Under £8/month for £120k/25 years. Less than £100 a year/£2.5k total to have peace of mind my family won't be left in the **** if something happens to me? That's less than I spend on toilet paper
maybe silly but check to see if this is available as a work benefit. My employer covers me 10 x salary plus I can pay for extra cover and get my wife covered for a certain amount very cheaply.
In my head it's a no brainer if you have a big mortgage, kids and a wife.
My only concern is that half the time I think my wife would prefer the money to me but Ive been with her over 20 years so I cant blame her
The issue I have with standard employers death in service benefit is that generally the require continuous service with the employer. Obviously if you're in an accident or pass away suddenly then they'll pay out, but in the event you suffer from a long term illness that leads to your termination you're basically left high and dry.
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If you are retired on medical grounds, you have no hope of getting a life policy that will replace your Company one
Exactly, that was his point.
Yes, but my point is that you shouldn't leave yourself exposed so you're reliant on Death in Service benefit if you can avoid it. Better to enter into something with a wider scope of cover now, while still healthy, depending on your circumstances of course.
maybe silly but check to see if this is available as a work benefit. My employer covers me 10 x salary plus I can pay for extra cover and get my wife covered for a certain amount very cheaply.
In my head it's a no brainer if you have a big mortgage, kids and a wife.
My only concern is that half the time I think my wife would prefer the money to me but Ive been with her over 20 years so I cant blame her
How does that work if you leave your job? Presumably that cancels the policy? Or can you continue to pay into it what the company used to?
If it just gets cancelled, be careful as getting a new policy when you're older can get a lot more expensive.
The policy is normally cancelled. That’s the reason why I’ve taken my own personal lol he’s out. The work policies are just nice to haves.
Fixed for accuracy.
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