Level Term Life Insurance Guide Discussion

kingstreet

I'd probably play around with this for an hour or two.

You have a need for unempoyment cover and for long-term income protection in the event of illness or disability.

This could be provided as follows;-

Unemployment cover + permanent health insurance (short deferred period)
or
Accident, sickness and unemployment cover + permanent health insurance (long deferred period).

By changing the emphasis, you can manipulate the costs and the providers to establish the best deal for you.

Different providers have different criteria and terms. The maximum claim period for an ASU contract is normally 2 years, although 1 year appears most widespread.

I'd toss this at an IFA and see what they can come up with.

missrlr

Hi

Thanks for the fast response I did toss it to an IFA and got the quote above.


Which I should add is to replace the ASU I currently have and provide a bit more but seems a tad OTT premium wise so was not sure of the logic with this.

amjed_afzal

I need your help as I am a little confused

I have just taken out an £81,000 mortgage and would like totake out mortgage protection if I am out of work or ill to pay for my mortgage.

Is there a protection for this including life cover or is ittwo different things?

Thank you for your help in advance.

kingstreet

Answered on the duplicate thread on M&E.

MRgullatas

I’m new to posting on forums, but have regularly read other forums on MSE.

So here goes, thought I’d run this past the forum…

Current mortgage £166k approx
Current debts £34k approx
Total current debts £200k approx

Current paying £118 approx per month for flexi life and critical illness plus income protection for the mortgage – this was taken out in 2006, for mortgage on a 30 year term…but it seems to increase a couple of quid every year.

I am married, early 30’s, wife late 20’s both non smokers and two dependents.

Both in secure jobs with decent level of sick pay – i.e. 6 months full, 6 month half. I know I get a DIS payment if I die, I think my wife does also, but will need to check.

Here are my thoughts – as looking to find cheaper cover whilst not compromising cover:

1. I think £118 is too high and probably cheaper is out there or would people expect this kind of monthly premium?
2. Is the norm for income protection to pay out for 12 months? If so, do we really need it – or am I confused here and does IP pays for the full term of the policy?
3. MSE suggest critical illness is a waste of time…therefore should I ditch this cover?
4. Does this cover I have already generally automatically pay off my mortgage or is a lump sum given to remaining spouse to make arrangements to pay off mortgage?

This is what I want to ensure is covered:

1. If I or my wife die, I would like all debts to be paid off. This will allow whoever remains to live without mortgage or debt worry, just on their wage.
2. If we both die at the same time, what will be paid out? I assume a joint policy will pay out once, but two single policies will pay out separately?
3. Our DIS should cover additional provisions, plus the capital in the house given that it could then be sold.


My questions I have are therefore:

1. Is our current cover about what people would expect?
2. Given our situation should we reconsider our cover and instead go for level term assurance rather than decreasing life insurance?
3. Is income protection a worthwhile policy to take out in our situation?
4. Is a critical illness element of the life insurance/assurance necessary or worth the paper it is written on?
5. Can we get a fixed cost premium for the term of the cover as oppose to increasing month on month?
6. Would a ‘in trust’ benefit? If so could someone explain simply what this means?


Many thanks all for your help with this – looking to change cover before Dec 2012 (final question: is this achievable?) at a fixed premium? Any suggestions as to where to look (ie is Cavendish or Moneyworld any good?) would be much appreciated.

Thank you in advance.

dunstonh

2. Is the norm for income protection to pay out for 12 months?

No. Payment protection pays out for up to 12 months (PPI). Income protection (PHI) pays out to selected end age (typically retirement age)

3. MSE suggest critical illness is a waste of time…therefore should I ditch this cover?

It is one of the most disgraceful articles on this site. We have managed to get Martin to drop his other badly written articles but we haven't really pressurised him on this one to do the same. The article should be ignored as it is wrong and obsolete.

4. Does this cover I have already generally automatically pay off my mortgage or is a lump sum given to remaining spouse to make arrangements to pay off mortgage?

Upto the surviving spouse as to how they spend the money.

1. Is our current cover about what people would expect?

I would prefer income protection (PHI) to payment protection (PPI)

2. Given our situation should we reconsider our cover and instead go for level term assurance rather than decreasing life insurance?

On an advised case that would be a mis-sale. However, its up to you what you do. I dont see the logic in paying extra for something you dont need.

3. Is income protection a worthwhile policy to take out in our situation?

It is considered one of the most important insurances you can have.

4. Is a critical illness element of the life insurance/assurance necessary or worth the paper it is written on?

Yes it is. Most advisers will tell you that they deal with more CI claims than they do life assurance. I also know of an adviser that is getting a payout on his CI due to recent claim.

5. Can we get a fixed cost premium for the term of the cover as oppose to increasing month on month?

yes

6. Would a ‘in trust’ benefit? If so could someone explain simply what this means?

for a joint owner, joint life, first death policy covering a mortgage then more often than not no. However, in some cases it can be beneficial. Describing trusts would take a manual hundreds of pages thick and that would still only be the basics.

MRgullatas

Thank you dunstonh for quick response.

I'm a lot clearer now on Income Protection - does IP pay out to your spouse if you die? also I imagine it stops paying out if you've been made redundant then find another job?

I didn't quite understand the mis-sale comment? Did you mean what we have is adequate and don't need level term or vice versa? What extra would we be paying for that we dont need?

Finally is £118 around market value (what you would typically expect) or is it wildly overpriced?

Thanks again for your help with this

dunstonh

I'm a lot clearer now on Income Protection - does IP pay out to your spouse if you die? also I imagine it stops paying out if you've been made redundant then find another job?

Income protection is income protection if ill. Not income protection if dead (life assurance does that bit) and not redundancy (payment protection does that bit)

I didn't quite understand the mis-sale comment? Did you mean what we have is adequate and don't need level term or vice versa? What extra would we be paying for that we dont need?

Taking out a level term assurance to cover need better suited with a decreasing term assurance is not good advice. The FOS have been upholding such complaints. The mortgage drops in amount each year and the life assurance should follow with it.

Finally is £118 around market value (what you would typically expect) or is it wildly overpriced?

Difficult to say without knowing whether you have budget options or comprehensive options, smoker status, health and occupation. Once you get into 30s premiums creep up quite quickly. 20s are still dirt cheap.

SHEILA54

dunstonh wrote: »

Why level term assurance and not decreasing term assurance?



Do you need to have that?

Hi

The suggestion is that I will have £150,000 left on the value of my house (once the mortgage is finished in 6 years) and there will be inheritance tax payable at 40% i.e £60000. It has been suggested that I take out a whole of life policy to pay that off on my death.

There is the additional consideration that my daughter, son in law and grandchildren live with me and have security of tenure written into my will for another 11 years, until the youngest grandchild reaches 18. If I die then inheritance tax is payable and the house would have to be sold to cover it so this life policy could be placed into trust to cover this amount.

dunstonh

The suggestion is that I will have £150,000 left on the value of my house (once the mortgage is finished in 6 years) and there will be inheritance tax payable at 40% i.e £60000. It has been suggested that I take out a whole of life policy to pay that off on my death.

Are you in a position to gift the money, even into a trust and then take out a policy just to cover the 7 year period? Or are the assets not of the type you can do that (or is the house that is doing the damage)?