Level Term Life Insurance Guide Discussion

Derbyshire2

Hi all

Would appreciate some advice according to our circumstances. Myself and my boyfriend are both in our late 20s and are just buying our first house together. We both have average incomes, don't have any children, are not stretching ourselves with the mortgage and have a fair amount of savings between us.

We have been given a quote for joint life and critical illness cover by the bank but are not sure whether to go for it or not. The way we're thinking about it at the moment is that if one of us was to die, the other would still be able to cope. Is this a niave view to have in our position? Obviously it would change if we were to get married and have children. Would it be advisable to start a plan now whilst we're still young regardless of our current circumstances?

Thanks!

dunstonh

We have been given a quote for joint life and critical illness cover by the bank but are not sure whether to go for it or not.

Banks are the most expensive place to buy. Even when using another insurance company than their own (typically up to 40% higher than an IFA)

The way we're thinking about it at the moment is that if one of us was to die, the other would still be able to cope. Is this a niave view to have in our position?

For the small cost, it is usually worth having.

Obviously it would change if we were to get married and have children.

What happens if your health changes and you can no longer get it or the price goes up (which it does each year you get older anyway)

property.advert

josharan wrote: »

I need to update my life insurance to cover the financial needs of my three children until the youngest is 20 years old (approx 15 years)......

I suggest you rethink.

You surely need cover until your youngest has potentially finished university and perhaps got their start in life. I would say 25 is a fair date and to be honest, adding a few years to the age hardly affects the premium so why not consider doing it for longer and simply stopping payments if you want later in life.

As to prices, IFAs state they can beat the online sites such as Cavendish but I don't know if they can unless you are paying them per hour, which costs far more than the £30 or so some of these companies charge.

Lifes_Grand_Plan

property.advert wrote: »

I suggest you rethink.

You surely need cover until your youngest has potentially finished university and perhaps got their start in life. I would say 25 is a fair date and to be honest, adding a few years to the age hardly affects the premium so why not consider doing it for longer and simply stopping payments if you want later in life.

As to prices, IFAs state they can beat the online sites such as Cavendish but I don't know if they can unless you are paying them per hour, which costs far more than the £30 or so some of these companies charge.

Hi everyone,

I think the above has answered my question but wanted to double check.

Background:
My Wife and I are due a baby in July and don't currently have life / critical illness cover. We want something that will pay off the mortgage / look after our child / the remaining partner if something happened to one of us.

I am looking at Level Term Life Assurance (Insurance?) for this purpose of about £100,000 for 20 years - so basically until our child would be 20 ish.

My Q was - if I base it on a 20 year term when I apply - does that mean I am forced to keep paying the policy for 20 years, or in a few years if I change my mind could I just cancel the policy and stop paying?

The other query that just sprang to mind - if we get joint cover and one of us dies we get the payout, so if the other partner dies at the same time, or at a later date, does that mean that the payout is no different? I.e. on a £100,000 policy, we only get one payout of £100k when the first of us dies but no more if the other dies later or at the same time?

If that is the case then would we be better with separate policies (about £1.50 a month cost difference) that would mean our child got paid out on both of us if we died?

Thanks for your help.

dunstonh

I am looking at Level Term Life Assurance (Insurance?) for this purpose of about £100,000 for 20 years - so basically until our child would be 20 ish.

Why only £100k and why only 20 years?

100k would generate around £5000 a year income. So, is that enough to meet your needs? (it is quite a low amount by todays standards)
Children tend to be dependent until the early to mid 20s. So more commonly you see 23-25 as the most common age used to match the term.

My Q was - if I base it on a 20 year term when I apply - does that mean I am forced to keep paying the policy for 20 years, or in a few years if I change my mind could I just cancel the policy and stop paying?

You can cancel whenever you like.

The other query that just sprang to mind - if we get joint cover and one of us dies we get the payout, so if the other partner dies at the same time, or at a later date, does that mean that the payout is no different? I.e. on a £100,000 policy, we only get one payout of £100k when the first of us dies but no more if the other dies later or at the same time?

Depends on how you buy the policy and set it up. If you set it up as joint owner, joint life, 1st death then only one amount will pay out. If you set it up as life-of-another, single owner basis with £100k each then both would pay out.

Lifes_Grand_Plan

dunstonh wrote: »

Why only £100k and why only 20 years?

100k would generate around £5000 a year income. So, is that enough to meet your needs? (it is quite a low amount by todays standards)
Children tend to be dependent until the early to mid 20s. So more commonly you see 23-25 as the most common age used to match the term.

Thanks dunstonh,

The £100k amount would pay off our mortgage (currently £80k) and then be a small amount left over. I'm not looking to see my other half / child right for life here (wish I could afford it), just to know that they will not have to worry about paying the mortgage to keep a roof over their head.

As for the age thing, I know we have plenty of family who would reach out should the worst happen. Again I wish I could afford to but being realistic, once a child reaches 18 then they are an adult and can fend for themself. Also our mortgage would be long since paid off by then so they get the house anyway.

dunstonh

You appear to have multiple needs.

1- mortgage coverage
2 - family protection.

So, you should look at each one individually. You should have one policy for 80k (decreasing term assurance if a repayment mortgage) to match the mortgage term. You should then have additional policies or segments (multiple segments on a single plan are very common) to cover the family protection needs.

it is more cost effective this way and set up correctly.

angeld

My husband and I are first time buyers taking on a mortgage of £196k over 30 years. We have never thought about life insurance before so don't really know where to start!
Should we take out two policies - 1) a joint decreasing term insurance for the mortgage, and also 2) a level term insurance for a specified amount? - also - what is the best way to work out how much this should be for?
or 3) a level term insurance that accounts for the mortgage also?
I have read many websites but I am not financially minded!! Thanks for your help!

kingstreet

Are either of you financially dependent on the other? Any children?

On the face of it, a joint decreasing term assurance could be used to repay the mortgage. You'd need to start with the mortgage amount and the term of the loan, so £196k sum assured over a 30 year term.

If one of you is financially dependent, or you have children, you could use a level term, or family income benefit policy to provide additional protection over and above the mortgage, for a period until the dependency will end, ie youngest child's 21st or 25th birthday.

Also have a think about what happens if you can't work due to illness or accident - income protection cover.

angeld

Thank you, that is very helpful. I am financially dependent - would it then be wise to have level term insurance until retirement age, or is that unnecessary? Also where is the best place to arrange a policy through - are websites like moneyworld.com or search engines ok to use? Thank you!