Level Term Life Insurance Guide Discussion

SHEILA54

You have been really helpful. :T

Frankly, if they aren't solvent by then then there will be something wrong! My son is fine, owns his own place and has a good salary but my daughter fell pregnant young, married the father and they + 2 kids live with me. They both work, her part time, but their salaries aren't great . My will gives them security of tenure until the youngest grandchild reaches 18, in 11 years time.

I have been drafting my will and the adviser has been pushing me to take out insurance to cover the inheritance tax. Obviously she is on commission so I am trying to make sure that she is giving me correct information by doing my own research. My son is also an insurance underwriter and has told me that he wants to see the policy and read the fine print (no pressure!!) before I sign anything.

MRgullatas

I am slowly getting to grips with regards to Life Insurance, Critical illness and income protection - but still not quite there! By Life Insurance I am referring to decreasing mortgage protection policy to the value of my mortgage.

A couple of things I still need to get straight in my head though - any thoughts / comments gratefully received:

- Generally should someone review/change their income protection every time their salary increases?

- Is it easy or worth reviewing Life Insurance, CI and IP on say an annual basis or say every 3-5 years or longer?

- Are most CI policies multi claim policies? (i.e can claim more than once on them - or once a claim is made the policy ends, basically single claim policies?)

- Do you have to take all three policies (Life, CI and IP) with the same company? Is it better value to go to the same company with all 3?

- If I decide to get Life Insurance written 'in trust' what are the main negatives of doing this (the positives I know!)

- Finally as a general rule of thumb to cancel an existing policy is it just a case of phoning up your provider and let them know you want to cancel there and then (obviously making sure the new policy in place before you do this!) and thats it?


Thanks again all in advance

kingstreet

MRgullatas wrote: »

I am slowly getting to grips with regards to Life Insurance, Critical illness and income protection - but still not quite there! By Life Insurance I am referring to decreasing mortgage protection policy to the value of my mortgage.

A couple of things I still need to get straight in my head though - any thoughts / comments gratefully received:

- Generally should someone review/change their income protection every time their salary increases?

- Is it easy or worth reviewing Life Insurance, CI and IP on say an annual basis or say every 3-5 years or longer?

Every two to three years should be sufficient and on a life event such as childbirth, marriage, house move etc. A major salary change should see you review your income protection

- Are most CI policies multi claim policies? (i.e can claim more than once on them - or once a claim is made the policy ends, basically single claim policies?)

Mostly single claim. Severity-based illness insurance has the ability to settle multiple smaller/part claims, then the full sum assured if written as such.

- Do you have to take all three policies (Life, CI and IP) with the same company? Is it better value to go to the same company with all 3?

Your choice. One, two or three companies can be used.

- If I decide to get Life Insurance written 'in trust' what are the main negatives of doing this (the positives I know!)

Can't think of any.

- Finally as a general rule of thumb to cancel an existing policy is it just a case of phoning up your provider and let them know you want to cancel there and then (obviously making sure the new policy in place before you do this!) and thats it?

Yes. Cancel the direct debit at the same time. Normally they send you outstanding premium letters for a couple of months too. You simply ignore them. Check for guaranteed insurability options before you cancel though. You may be giving up the chance of ordinary rates cover, even if you're in poor health.

MRgullatas

Thanks kingstreet, that is helpful.

So with a single claim policy...once you've made a claim and the policy then ceases, do you just then go out and buy another policy to cover you for future CI? (Assuming you'd have to go to a different provider as the one you've just claimed from probably wont offer you a new policy?)

If so, surely a multi claim policy would be better as with guarranteed premiums this will not go up once a claim is made? I know there are a few providers that offer multi claim policies like pru protect for example.

I currently have decreasing life mortgage protection with CI and IP (so decreasing life assurance i think?) (My current policy is not in trust)

Can you still write a policy linked with a mortgage 'in trust', or is it only level term assurance policies that can be written 'in trust'?

I've read that once a trust is set up it is difficult to cancel...Surely if you cancel a policy and take out a new policy the trust will cease and you have an opportunity to set up a new trust as it were - or can 'trusts' be ported from provider to provider?

I now know what dunstonh meant on his last post to me that 'trusts' are pretty much a minefield!!!

Lastly...is it right that generally income protection policies only pay up to 50% of your salary?

kingstreet

Pru Protect only pays put multiple times on less severe cases of an insured condition. Once you get the full payout for a condition, that's it AFAIK.

If you are concerned about critical illness cover after a critical illness claim, Scottish Provident offers buyback. This allows you 50% of the claim amount (max £100k) of cancer, heart attack and stroke cover foe the term remaining on your original policy.

You pay an additional monthly premium for buyback, then once you've made a claim and exercised the option, the premium is £25 per annum.

Off the top of my head, Scot Prov is the only office offering CI buyback. Liverpool Vic offers life cover buyback after a CI claim.

You can write a mortgage protection policy in trust. It's unusual as the benefit is for a fixed need. However, if it's a single life policy, the benefit has to go into the deceased estate and be dealt with that way. Writing it in trust means it goes to the beneficiary directly. It can be useful in tenancy in common situations where the benefit isn't going to the other property part-owner.

Once written in trust, you could only cancel it formally by lapsing the policy. However, you may be able to invalidate the trust if there aren't sufficient trustees. It's getting a bit technical now. TBH as you can change beneficiaries and trustees in a discretionary/flexible trust the chances of wanting cover outside a trust are negligible.

Income protection plans normally set a maximum of around 50% of earnings because the benefit is payable tax-free. A higher limit would bring the possibility of moral risk - the policyholder being better-off not working. When I first started in the industry, the maximum was 75% less SSP/invalidity benefit, as the benefit was only tax-free for one complete fiscal year. Group/Exec plans still have higher limits because the benefit is paid to the firm and paid to the individual as continued salary and subject to the usual tax and NI deductions.

MRgullatas

Thanks kingstreet - so IP is pretty much based on gross monthly income (i.e. pre tax) rather than net? I always figured it was 50% of net monthly income - but the 50% makes sense now!

Interesting about the buyback - is that similar to the waiver - i.e. when you make a claim your premiums are then waived for the rest of the policy or for as long as the claim is valid? (I think thats what I understand the waiver to mean?)

my only concern on CI was if say my wife made a claim under CI, then at some point later I needed to make a CI claim, that we wouldnt be able to...but thinking about it while I'm typing, thats another reason I suppose to have two individual policies rather than a joint policy!! See I said I was getting there with understanding it!!

If you dont go for buyback and say I make a claim under CI next year, and then my policy ceases...I assume I can then just go out and buy another one - however premiums are likely to be higher given I have previously made a claim and will therefore have a CI history.

Finally in terms of children - where most CI policies now state children cover for up to say 50% of benefit...does that mean the child(ren) are covered for the same CI that the policy covers the adult for?

Thanks again

kingstreet

Yes. Income protection is usually based on a percentage of gross income.

No. Waiver means if you are unable to work due to illness or accident, after a qualifying period, the cover continues but you do not have to pay the premiums until fit enough to return to work.

Buyback means you can get critical illness cover after making a successful critical illness claim without further evidence of health. Your chances of getting new critical illness cover at standard rates after making a successful claim are vastly reduced.

Yes. You have discovered the reason for two single plans, rather than one joint one! BTW children's critical illness cover is doubled if you have two single plans.

Children's critical illness cover normally covers the same illness definitions as the adult policy. There may be one or two differences, such as total permanent disability.

Cookie_Monster_3

I am 24 years old and I am looking into life insurance for my parents, since they aren't very money-savvy.

My dad is self-employed, my mum is employed with critical illness cover from her employer. They are both in their early 50s and non-smokers and in general good health. I am their only 'dependent' so their policies should only be paying out to each other.

Currently there is £85k left on their repayment mortgage to be paid over the next 16 years.

Would it be reasonable to take out the following policies:

1) A joint decreasing term insurance policy for the mortgage at £85k over 16 years.
2) PHI policy for my dad for £current_annual_income p.a. until retirement.
3) CI policy for my dad.
4) If my mum moves to another company without the CI cover, take out CI policy for her, too.
5) PHI policy for mum?

Is this overkill? Do you think it will be sufficient to have decreasing term insurance + PHI and not have CI?

I would be grateful for your thoughts!

weighty1_2

kingstreet wrote: »

Pru Protect only pays put multiple times on less severe cases of an insured condition. Once you get the full payout for a condition, that's it AFAIK.

PruProtect allow you to "protect" the Serious Illness Cover up to a maximum of 100% therefore in the event of suffering a claimable event (whether a full payout or partial) the cover automatically tops back up to 100% of the sum assured.

You can choose varying percentages of protected cover so that you always retain some SIC cover, dependent on needs.

Once written in trust, you could only cancel it formally by lapsing the policy. However, you may be able to invalidate the trust if there aren't sufficient trustees. It's getting a bit technical now. TBH as you can change beneficiaries and trustees in a discretionary/flexible trust the chances of wanting cover outside a trust are negligible.

You can only change/retire trustees with the agreement of that and the other trustees though, since they are also formally the owner of the policy. Since in many circumstances a trustee is also named as a beneficiary it can become difficult to get them to retire, even more so when they are the sole additional trustee with the settlor since they would have absolute control of the trust funds following the settlors death.

staggering

The wat i see it is that all life/ critical illness policies are a con, i had a policy with a company for years and then with the current crisis we were contacted by a well known company offering to " beat what we were paying for the same cover" now the "critical" words are "same cover" unfortunately 3 years later i now have an acute kidney disease and have had a heart valve replacement, guess what, the company paid out 12 month's mortgage payments but want no part of critical illness cover. Now in the policy it doesn't mention critical illness ( fair enough ) but the policy was sold to us as a like for like policy, and if i had stayed with mt existing company the would haqve paid out on the policy i had with them. All i can say is buyer beware