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Level Term Life Insurance Guide Discussion

edited 5 October 2010 at 8:26PM in Insurance & Life Assurance
485 replies 147.9K views
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  • AnniseleAnnisele Forumite
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    I think VJ is saying that he's taken a policy for £200k at under £10 per month - but if he has, then I'm curious as to whether or not the premium is reviewable.
  • kingstreetkingstreet Forumite
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    VJ_ wrote: »
    Not necessarily - If you're getting level term life assurance (as I'm doing as part of buying my first flat), the cheapest way seems to be to take it out for as long as possible; my mortgage is only 63,000 over 25 years, but I can get 40 years of £200,000 cover for under £10\month as I'm only 28.

    If I get run over tomorrow, that insurance will cover my mortgage, funeral, cremation & any unforeseen costs* with plenty to spare.
    Hopefully the same policy will still cover most\all of that in 5\10\15 years time when I'll (hopefully) have a bigger house, family etc. but I'll still only be paying under £10\month.

    Why bother with many separate policies that only get more expensive as I get older, when I can have one fixed at a very low rate until I'm 68?



    *Currently, my only other debt is my student which is written off at death.
    ... and you've written it in trust, of course, to speed the claim process and to avoid future inheritance tax liabilities? ;)
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • ExpertAdviceExpertAdvice Forumite
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    I absolutely agree with VJ. I dont see any point getting cover just to cover the mortgage especially when you are young and can get cheaper cover. One should try to go for longer coover till 70-75 or even 80. That gives more chances of a payout. Life expectancy in UK is almost 80 and these things work on probabilities.

    Since you would be paying for 30-40 years, you should give yourself a maximum chance of payout.

    Thats my view.
  • magpiecottagemagpiecottage
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    Annisele wrote: »
    I think VJ is saying that he's taken a policy for £200k at under £10 per month - but if he has, then I'm curious as to whether or not the premium is reviewable.

    I reckon there is (very roughly) a 15% chance he won't survive the 40 years.

    The premium paid if he survives the whole term equates to under 2.5% of the death benefit (assuming it is not reviewable). That ignores the fact that there are charges incurred by the insurer and that those policyholders who do not survive will not pay their premiums after they die.

    It also ignores the fact that the insurer can invest them money not being used to pay out but I do not think this would be commercially viable as a non-reviewable premium.
  • I absolutely agree with VJ. I dont see any point getting cover just to cover the mortgage especially when you are young and can get cheaper cover. One should try to go for longer coover till 70-75 or even 80. That gives more chances of a payout. Life expectancy in UK is almost 80 and these things work on probabilities.

    Since you would be paying for 30-40 years, you should give yourself a maximum chance of payout.

    Thats my view.

    I'm afraid your username falls rather short of what you actually say in your posts.

    VJ has no current need for life cover until 70 or 80. He is saying he will take it just in case. That is a hard point to argue and certainly any QUALIFIED adviser who would give EXPERT ADVICE would find it difficult to justify recommending a policy over and above the clients need 'just in case' he needs it in the future.
    I am a Financial Adviser specialising in Mortgages, Protection, Health and Medical Insurance. I also write wills. All information posted on this site is for discussion only, and should not be taken as advice.
  • lisyloolisyloo Forumite
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    I dont see any point getting cover just to cover the mortgage especially when you are young and can get cheaper cover. One should try to go for longer coover till 70-75 or even 80. That gives more chances of a payout. Life expectancy in UK is almost 80 and these things work on probabilities.

    Since you would be paying for 30-40 years, you should give yourself a maximum chance of payout.

    I disagree with this although I fully accept both peoples cirucmstanecs and views vary.
    There is a lot of point in having insurance when you need it (at the time you are exposed to risk) and not paying for it when it's completely unnecessary.

    Getting cover for longer will be more expensive, doesn't guarantee a payout simply to provide a payout when you probably don't need it.
    I accept it's completely down to personally choice, but I would not pay my money for that option.
  • dunstonhdunstonh Forumite
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    I absolutely agree with VJ. I dont see any point getting cover just to cover the mortgage especially when you are young and can get cheaper cover. One should try to go for longer coover till 70-75 or even 80.

    Which will increase the cost of the monthly premium from day 1. Plus, chances are the policy will be long gone before age 70 (or older).

    Your expert advice would be pretty easily be classed as a mis-sale if it was professional advice.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • VJ_VJ_ Forumite
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    kingstreet wrote: »
    ... and you've written it in trust, of course, to speed the claim process and to avoid future inheritance tax liabilities? ;)
    My combined assets are currently no where near the death tax threshold; but I'm going to get my will & probate sorted out by my solicitor once this sale is completed :)
    I do not think this would be commercially viable as a non-reviewable premium.
    The premium is fixed for the 40year term of the protection. It's simple level term life assurance for as long as they would let me take it out. I suspect that it's worked out on the basis I'm not going to die until my 70s or 80s, after the policy is over (it's unavailable for people over 65 & there's a minimum of 5 years cover you have to take). By taking it out now, I'm covered until 68 due to the maximum 40yr period.
    VJ has no current need for life cover until 70 or 80.
    Wrong - If I got run over by a bus tomorrow, the flat I'm buying would have to be sold to pay off the mortgage without the life cover. This way, the mortgage can be paid off, any other outstanding bills etc. paid, my funeral arranged etc. & the flat can remain with my family.
    He is saying he will take it just in case.
    All insurance is taken out 'just in case'. I'm simply extrapolating the principles.
    any QUALIFIED adviser who would give EXPERT ADVICE would find it difficult to justify recommending a policy over and above the clients need 'just in case' he needs it in the future.
    It's called long term planning - it's cheaper to over-insure now than it would be to add extra insurance in my 30s\40s\50s for each step up the housing ladder & stage in life I go.
    If qualified expert advisers aren't allowed to help you with long term planning I won't bother with them & I'll do my own research instead as their advice would be pointless short-termism.
    ~share and enjoy~
  • VJ_ wrote: »
    My combined assets are currently no where near the death tax threshold; but I'm going to get my will & probate sorted out by my solicitor once this sale is completed :)

    The premium is fixed for the 40year term of the protection. It's simple level term life assurance for as long as they would let me take it out. I suspect that it's worked out on the basis I'm not going to die until my 70s or 80s, after the policy is over (it's unavailable for people over 65 & there's a minimum of 5 years cover you have to take). By taking it out now, I'm covered until 68 due to the maximum 40yr period.


    Wrong - If I got run over by a bus tomorrow, the flat I'm buying would have to be sold to pay off the mortgage without the life cover. This way, the mortgage can be paid off, any other outstanding bills etc. paid, my funeral arranged etc. & the flat can remain with my family.
    All insurance is taken out 'just in case'. I'm simply extrapolating the principles.

    It's called long term planning - it's cheaper to over-insure now than it would be to add extra insurance in my 30s\40s\50s for each step up the housing ladder & stage in life I go.
    If qualified expert advisers aren't allowed to help you with long term planning I won't bother with them & I'll do my own research instead as their advice would be pointless short-termism.

    YOu get confused between a NEED and a WISH. You WISH to leave the house to your family but you dont NEED to.

    On the other hand if you have a family you have a NEED to cover yourself for their benefit if you died.

    You seem pretty smug that you have things sorted so I'll refrain from commenting further - but the most important part of my job is the ADVICE I give. Whether that in turn leads to a recommendation of a product or not is secondary. I have opened my mouth on plenty of occasions to DIYers like yourself( in the real world not MSE) and in doing so have saved them from potential disaster. Not that I earned a penny from it mind... Remember anything you do by yourself has almost no protection should you select the wrong product.

    Obviously I hardly need to mention the net effect of inflation on 200,000 over 40 years as you will have already done your research and considered the ned for indexation on the policy to counter the effect.
    I am a Financial Adviser specialising in Mortgages, Protection, Health and Medical Insurance. I also write wills. All information posted on this site is for discussion only, and should not be taken as advice.
  • edited 13 May 2011 at 2:40PM
    kingstreetkingstreet Forumite
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    edited 13 May 2011 at 2:40PM
    VJ - you've bought cover for 40 years but seem to have decided to ignore the other relevant issues which should have been considered at the time.

    A will is a very good idea as it ensures your assets will pass to those you wish to receive them. Probate is something which is only required after your death and it is a task your executor has to undergo before he/she can distribute your will.

    As things stand, your life cover will pass into your estate and will be distributed according to intestacy rules only when probate is settled. During that time, your home may well have been repossessed, so it's not an ideal scenario if you'd like to leave it to someone in particular.

    Writing the policy in trust, as I mentioned, has FUTURE Inheritance Tax benefits when you may have other assets and other properties, as you are planning for the long term. Indeed, if you don't take precipitate action, the £200k from this policy is actually using up over half your IHT nil rate band, so it isn't going to take a lot to give you an IHT problem you could easily avoid.

    Before the IHT benefits are apparent, the trust also ensures the life cover is paid directly to those you wish to receive the money without the need for probate, so it's made quick and easy and the person you wish to inherit your home can do so while settling the mortgage from the proceeds.

    Trusts can accommodate changes in beneficiaries at any future point, so naming someone now doesn't mean they will always have to benefit, if for example you want to remove them if (for example) you get married in the future.

    Writing a trust is free and it makes sense.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
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