How much life insurance do I need??

RoyalSwank

I've never had life insurance before, but with a little one on the way and a wedding on the horizon it's required.
I have no idea how what my life should be worth!

My gf has a 35y mortgage at c.£140k (we've got c. £70k equity). When we re-mortgage next year this will come down to 25y. I can see us getting a bigger house in the next few years so we might be looking at a £300k+ mortgage.
I'm 33 and make a reasonable income with good prospects (as does my partner). I'll join a final salary pension scheme next year which will offer death in service protection (not sure exactly how much, but quite a generous amount). If I die I want my partner and child to be financially comfortable.

A financial advisor (not independent to my knowledge) has advised that I take out £200k level term for 35 years. His quote is about 25% more per month than the cheapest I can find online (not much per month but £000s over the term). When I question this he says that the company he recommends is better to deal with / higher quality underwriting etc + his advice is paid through commision. He's advised a similar term (but reduced ££ cover for my gf as she's covered through her pension).

Cheaper insurance companies I've found include Aviva and L&G. These must be reputable?
Is 35y the right term? I intend to be well retired by then and my gf will be nearly 70. I very much hope our child will have left home!
200k seems a reasonable level for each of us to be insured for - is this about right based on my description?

Thanks in advance, RS

dunstonh

A financial advisor (not independent to my knowledge) has advised that I take out £200k level term for 35 years.

If you need advice, go independent. IFAs are cheaper than tied sales reps as well. Even when using the same protection providers.

However, who not use a decreasing term assurance to match the mortgage (cheaper) and a level term for the "family" protection.

You should deduct acrrued pension and death in service from your financial need.

yelf

remember that if a claim has to be made an IFA will do all the chasing etc: something you / your partner probably wont want to do at such a dark time. That is probably worth paying the extra for (alternatively pay a fee)

RoyalSwank

dunstonh wrote: »

However, who not use a decreasing term assurance to match the mortgage (cheaper) and a level term for the "family" protection.

You should deduct acrrued pension and death in service from your financial need.

This is a good point. When my partner and I are both coverd 4x salary by our pensions next year, we should only need decreasing term insurance for the mortgage (though I'll think about this in more depth)

remember that if a claim has to be made an IFA will do all the chasing etc: something you / your partner probably wont want to do at such a dark time. That is probably worth paying the extra for (alternatively pay a fee) .

Another good point and one the advisor made. Is this guaranteed though? They might be dead in 10 years time! Also, is a non IFA obliged to do this? Using a reputable company, would the claim process be that complicated and difficult?

Martin says that in terms of life insurance, go for the cheapest providing they're reputable. I would assume the likes of AXA, L&G and Aviva are all much of a muchness?

dunstonh

Another good point and one the advisor made. Is this guaranteed though? They might be dead in 10 years time! Also, is a non IFA obliged to do this? Using a reputable company, would the claim process be that complicated and difficult?

Tied agents are notorious for changing. Many wont be around after 2012 (qualifications being increased and all existing ones have to meet that or leave).

Its a non-issue though. Using a tied agent is the most expensive way to buy insurance. There is no reason to buy from one unless you like paying more.

Martin says that in terms of life insurance, go for the cheapest providing they're reputable. I would assume the likes of AXA, L&G and Aviva are all much of a muchness?

Whilst largely correct, it is worth noting that some differences to apply. Some are minor and not worth worrying about unless closely priced (such as children death sum assured) but others like guaranteed insurability options (GIO) are. I have had a few clients over the years activate the GIO options. If GIO had not been available (and its not on some plans or its restricted in some heavy way) then they would have had problems.