Level Term v Decreasing term life assurance

griffster

We're on a bit of a budget at the moment and trying to decrease our extortionate life insurance and critical illness policies. Having read here I have a good idea of what I need, and I'm going to try and use one of the execution only brokers to assist. However, I'm not sure whether I ought to go for level term or decreasing term. Which ones tend to be cheapest? Mortgage of £200K, but have death in service cover of 3 times my salary which is £35K a year, with my partner on £15K a year. Can you assist?

dunstonh

However, I'm not sure whether I ought to go for level term or decreasing term. Which ones tend to be cheapest?

The cheapest you havent listed. That would be family income benefit. However, out of the two you have listed it would be decreasing term assurance. However, that isnt much use if it doesnt fit the financial need.

Can you assist?

Not enough facts and it would fall under regulated advice it we started to try and do a proper shortfall analysis and recommendation and the board isnt allowed to do that. So, either you do it yourself properly or you take a punt and do a random amount like 10x salary or you get someone to do it for you.

griffster

Thanks Dunstonh. I understand now. Got decreasing term at the moment. I went for a quote on level term for the full £200K and had a nasty surprise! lol

Ok. Didn't know that but makes sense I guess. Guess we can always change again at a later date if we find it's not working out.

Was thinking whether it would be an idea to get decreasing term to cover the full mortgage balance and use the death in service cover as extra on top. Does this sound a good idea?

Appreciate your help here. Understand it can't be binding in any way of course. We took out the current policies having spoken to a financial advisor when we took out our mortgage last year, so I don't think we're doing anything drastically different to that at any rate. Don't have PHI at the moment either anyway.

ACG

If you have an existing policy you may have a few options open to you.

First would be to see if you can reduce the sum assured you currently have, or ammend it - if it is level then you can look at altering it to decreasing. Some companies will do this, some wont.
The benefit of this is that it usually means that you had underwriting done when you were younger and possibly healthier. However life cover i believe is at the cheapest now than it possibly ever has been in the past.
So you may be able to compare altering an old policy to replacing it with a new one.

As for sum assured different people have different requirements. If you die to you want your mortgage cleared or do you want a bit extra to cover funerals plus any loans etc? If you dont have a clue this is what a financial advisor is for.

Hope this gives you a bit of help.

griffster

Understood. With these execution only brokers, do you have to pay the fee up front before they do their searches, or do I only pay if decide to opt for a quotation they've provide for me? Martin Lewis suggests I try all three brokers on his article but could get quite expensive if I have to pay £35 a go on each!

VIGILANT22

Why would you want to pay a fee for execution only?! what are you paying for?
Do you understand execution only?
Why do you not want to be advised on the product that fits in to your budget.
If you have critical illness at the moment and intend to swop this for life only, an experienced advisor will ask you to sign a disclaimer..This is because should either of you be unfortunate enough to develop a critical illness in the future..you cant have a claim upheld against anyone....

Would you mind telling me the article you're referring to...thanks

griffster

VIGILANT22 wrote: »

Why would you want to pay a fee for execution only?! what are you paying for?
Do you understand execution only?
Why do you not want to be advised on the product that fits in to your budget.
If you have critical illness at the moment and intend to swop this for life only, an experienced advisor will ask you to sign a disclaimer..This is because should either of you be unfortunate enough to develop a critical illness in the future..you cant have a claim upheld against anyone....

Would you mind telling me the article you're referring to...thanks

The article I'm referring to is http://www.moneysavingexpert.com/insurance/level-term-insurance#how

It says that you pay a one-off fee up front instead of paying continual commission on an ongoing basis, making it cheaper in the long run.

I don't intend to swap for life assurance only. Mean to keep both, but need to reduce the premium we're paying on our current policy.

VIGILANT22

griffster wrote: »

The article I'm referring to is http://www.moneysavingexpert.com/insurance/level-term-insurance#how

It says that you pay a one-off fee up front instead of paying continual commission on an ongoing basis, making it cheaper in the long run.

I don't intend to swap for life assurance only. Mean to keep both, but need to reduce the premium we're paying on our current policy.

griffster Thanks for that..:)
You did read:

" However beware that the fact they’re ‘execution only’ means they just find you the price without giving any advice"

Swapping critical illness policies is a high risk...you won't necessarily find a like for like policy...not all critical illness policies cover all critical illnesses....Also...If you had any visits to the Dr for almost anything since your current policy was put in place this should be declared and could result as an exclusion on the new policy....I could write forever on this subject...:) as so much involved....
I sometimes think it is far more important to have Income Protection (don't confuse this with dodgy payment protection) which covers you whilst off work...and IP (Income Protection) is not these short term 1 or 2 year polices...
This is a very specialised area...and sadly this is why all these programmes we see on TV when a policy wont pay out is because the policy wasn't understood/explained in the beginning.....
Also the fact you're now older since taking out the current policy will influence price....

griffster

Yeah, had a look at a few Ts and Cs when I was looking at some quotes from a price comparison website earlier. Must admit though that the list of illnesses matched quite preferably with what we currently are insured for.

We currently have mortgage repayment cover which sounds like the policies you suggest I steer clear of. How does import protection differ from mortgage repayment cover? Does it include cover for redundancy for example? Is it expensive? Could we use it as a substitute for both critical illness cover and MRC?

VIGILANT22

griffster wrote: »

Yeah, had a look at a few Ts and Cs when I was looking at some quotes from a price comparison website earlier. Must admit though that the list of illnesses matched quite preferably with what we currently are insured for.

We currently have mortgage repayment cover which sounds like the policies you suggest I steer clear of. How does import protection differ from mortgage repayment cover? Does it include cover for redundancy for example? Is it expensive? Could we use it as a substitute for both critical illness cover and MRC?

Sounds like "mortgage repayment cover" is ASU Accident, Sickness & Unemployment which only pays out depending on how you have the policy set up for 12 or 24 months...These policies only allow you to claim once and if yr long term sick they stop paying after 24 months...You could be long term sick BUT not have a critical illness, so what would you do after 24 months?
Income Protection does exactly as it says, it protects your income, a cost effective way is to keep your asu/mrc and have the income protection deferred for the length of time the asu/mrc pays out...then when the asu/mrc the other kicks in........
Before making your decision inform yourself fully...I can't stress that enough

griffster

So income protection covers redundancy as well then. From my research and other advice from here, it looks like the best bet would have Level Term Life Insurance, Critical Illness Cover, ASU, and Permanent Health Insurance deferred for a the period of the ASU to cover long term sickness, but the total premium here is way beyond our means. Something has to give unfortunately. What I'm sketchy on is whether I can replace the critical illness and ASU with income protection. Does this work? Would that be cheaper?