Level Term Life Insurance Guide Discussion

budg13

Hi guys, quick question, hopefully someone can advise me.
So, around the time of the birth of our child (18 months ago), I took out 'Life Insurance' with L&G.
1) We have a joint policy with a set cover of £100,000
Also, we have 2) a joint 'Decreasing Life Insurance' Policy which started at £140k, but is obviously constantly decreasing over time.
My question is - is it necessary or commonplace to have both in place? Both appear to be joint policies (without scrutinizing the policy documents) as both me and my wife are named on each policy.
Any thoughts at all?

csgohan4

budg13 said:

Hi guys, quick question, hopefully someone can advise me.
So, around the time of the birth of our child (18 months ago), I took out 'Life Insurance' with L&G.
1) We have a joint policy with a set cover of £100,000
Also, we have 2) a joint 'Decreasing Life Insurance' Policy which started at £140k, but is obviously constantly decreasing over time.
My question is - is it necessary or commonplace to have both in place? Both appear to be joint policies (without scrutinizing the policy documents) as both me and my wife are named on each policy.
Any thoughts at all?

It depends on how much money you need should one or both have an unforeseen accident.

Joint policies usually are cheaper than stand alone as when one claims the policy is completed.

Personally I have single stand alone policies to cover enough to pay of the mortgage and some extra to help, up to you how much that is and how much you can afford to pay every month in premiums

Aretnap

RobSpark said:

Can anyone tell me what would be the point of continuing to pay for a decreasing term policy in the later years? Most obviously the final year of the policy. Continuing to pay out the same premium for a potential £5K payout in the final year as compared to a £150K payout in the second year doesn't make any sense. Have I missed something??

As SonOf says it's a judgement call you can make at the time. If you stay in good health, and reach a financial position where the payment in the last few years would not really be required were one of you to die, then you can cancel the policy early once you feel that the premium/payout ratio is no longer worthwhile. However if in 24 years time you have serious health problems and aren't sure that you'll last another 12 months then keeping up the payments for that £5000 final year payout might seem like reasonable value...

Aretnap

budg13 said:

My question is - is it necessary or commonplace to have both in place?

Yes, it's quite common and often a good idea to have more than one life insurance policy. For example you might have a decreasing term policy that would cover the mortgage and whose value. However even with the mortgage gone your OH would still have bills that need paying and which don't disappear after 25 years - so an additional level term policy to provide help with those might be a good idea. A third type of policy to consider is a family income benefit policy, which rather than paying a lump sum would pay the surviving partner a monthly income until a fixed date in the future (for example your projected retirement date, or the date you expect the last child to leave home etc).

SonOf

budg13 said:

Hi guys, quick question, hopefully someone can advise me.
So, around the time of the birth of our child (18 months ago), I took out 'Life Insurance' with L&G.
1) We have a joint policy with a set cover of £100,000
Also, we have 2) a joint 'Decreasing Life Insurance' Policy which started at £140k, but is obviously constantly decreasing over time.
My question is - is it necessary or commonplace to have both in place? Both appear to be joint policies (without scrutinizing the policy documents) as both me and my wife are named on each policy.
Any thoughts at all?

Yes, it is normal to have multiple policies or segments.   
The most common scenario is to have one joint plan covering the mortgage (a decreasing term assurance for a repayment mortgage) and another 1 or 2 level term assurance plan to provide family protection. 

£100k is on the low side of things but sometimes budget dictates what you can afford.

nyree68

Hi. Not sure I'm on right page. My question is why do you have to be dead within 12 months for I surance to pay out on terminal illnesses?  I've been diagnosed with incurable cancer but insurances wont pay out until I've only got  12 months to live. Why? 

dunstonh

nyree68 said:

Hi. Not sure I'm on right page. My question is why do you have to be dead within 12 months for I surance to pay out on terminal illnesses?  I've been diagnosed with incurable cancer but insurances wont pay out until I've only got  12 months to live. Why? 

a) Because it is life assurance and not critical illness cover.
b) terminal illness benefit is not a replacement for critical illness cover.   It just allows you to settle your affairs whilst you are alive and do some things you want to do before you pass away.

busicat

Sorry to learn about your cancer.

The 12 month rule is because (unlike "critical illness" cover which would pay straight away for, eg, cancer, but is much more costly) terminal illness cover is priced as just a small (in time) advance of the payout that's been costed for on death. It originated at the time of the HIV crisis, where some people were in desperate need of funds soon before they died, but couldn't access their life cover. So insurers solved that sort of situation by giving a means of accessing the money a few months ahead of the payout they would be making soon anyway. I hope that makes sense.

Weighty1

nyree68 said:

Hi. Not sure I'm on right page. My question is why do you have to be dead within 12 months for I surance to pay out on terminal illnesses?  I've been diagnosed with incurable cancer but insurances wont pay out until I've only got  12 months to live. Why? 

Sorry to hear about your diagnosis.  The reason for this is because the insurer know that if life expectancy is less than 12-months then there's a good chance the life assured won't be able to work and would therefore experience financial hardship, so really it's to prevent that hardship occurring when they know they will soon pay out on the plan anyway.

I've previously had a client with chronic lymphocystic leukaemia.  He'd been diagnosed 8-years previously and whilst his cancer was incurable he was likely to continue for a good number of years.  That, plus forever expanding medical treatments may mean he IS cured in the future.  For that reason an insurer wouldn't want to pay out on a life insurance plan as death during the term of the plan is not a certainty. 

johnspence1

Good Morning I would like some guidance regarding term assurance for a 66yo male in good health. I would like the policy to cover IHT liability and thought 14 years would be a reasonable length of time to adjust my finances to reduce any liability to IHT to zero, My question is if I take a decreasing policy then in the first 7 years there may be a liabilty to tax which exceeds the payout so is it possible to have a level term payout for say 5 years the a decreasing payout for the reamining 9 years. Or are there better options of which I have not considered?

Thank you