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Level Term Life Insurance Guide Discussion

edited 5 October 2010 at 7:26PM in Insurance & Life Assurance
497 replies 149.7K views
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  • edited 13 May 2011 at 1:49PM
    ExpertAdviceExpertAdvice Forumite
    156 posts
    edited 13 May 2011 at 1:49PM
    Thats right VJ.

    I have a few clients between 60-65 who have to pay a high price to exten their policy or get a new one at this age. If they had got cover for longer term while they were young by paying a couple of quids extra, they wouldn't be in this situation especially now when they have developed medical conditions.

    But, I guess they got advice from "OVERSMART" advisers like step****** who probably believe in copy book style rather than being practical.

    So, its realy how you view things. You shouldn't judge others. People have more peace of mind sine they know they are covered till 75-80 thats when they will most prabably die as per stats.
  • kingstreetkingstreet Forumite
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    So we should all be buying whole life policies at the age of 18 then?

    Genuine question. Not designed to be a wind-up.

    VJ has his cover until 68 and drops down dead at 69. He's still married and his widow, who would have been in for a big lump sum (subject to inflation, of course) then gets nothing.

    I'm not saying what VJ is doing is wrong - as long as he continues to consider his changing needs and how affordability for cover isn't just a function of cost, but is also a function of disposable income which will change over time.

    I'm glad we can discuss issue like this here. I'd get thrown out of some of the other fora I use for boring everyone to death. :D
    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.
  • kingstreetkingstreet Forumite
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    Just one more thing.

    As AIDS never really materialised as the massive factor it was suggested it would be in 1988, I wonder why we've never seen the re-introduction of wonderful and innovative contracts like we had in the 1980s?

    Phoenix Assurance's Increasing Protection Plan was a ten year increasing term assurance which doubled in sum assured over the term. At the end of the ten years you could renew it, or convert it to a level term or whole life.

    There were conversion, increase and renewal options on most level term assurance contracts and being able to change term to whole life today would be a useful add-on.
    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.
  • VJ_VJ_ Forumite
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    YOu get confused between a NEED and a WISH. You WISH to leave the house to your family but you dont NEED to.
    I don't NEED to get contents insurance either, I could just re-buy everything should I be burgled. I WISH to, as it gives me peace of mind.
    On the other hand if you have a family you have a NEED to cover yourself for their benefit if you died.
    I have a family, brothers, sisters, nieces, parents. They are no less important than any future spouse\children - who will benifit from this policy at a cheap rate, rather than an expensive one taken out later...
    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 looked at indexation, and decided against it on the basis that I'd have to be earning £50,000\year to get a £200,000 mortgage by my-self. As a Librarian, this is highly unlikely & should my needs go up, I can always purchase more cover when I need it.

    However, I'm looking into getting index-linked PHI.
    kingstreet wrote: »
    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.
    I'm not ignoring it, I still haven't completed on the flat. I'm just doing one thing at a time; thanks for the advice though; certainly things to think about.:)

    BTW I know what probate is; I just had my solicitors wills & probate site up in another tab so typed it on auto-pilot, as I was reading...:o
    ~share and enjoy~
  • edited 13 May 2011 at 2:19PM
    dunstonhdunstonh Forumite
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    edited 13 May 2011 at 2:19PM
    I don't NEED to get contents insurance either, I could just re-buy everything should I be burgled. I WISH to, as it gives me peace of mind.

    need means financial need. Not wish. You have a financial need for contents insurance.

    You have a financial need for life assurance but you are choosing to go with terms that exceed that need and paying more for doing so. Are you also paying more on all your other financial needs or are you compromising on them?

    The average of a term assurance policy is just 7 years. Mainly as requirements change. You will have the same life policy for 40 years.
    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.
  • Important update! We have recently reviewed and updated our Forum Rules and FAQs. Please take the time to familiarise yourself with the latest version.
  • magpiecottagemagpiecottage
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    dunstonh wrote: »
    Your expert advice would be pretty easily be classed as a mis-sale if it was professional advice.

    I know of a case where the FSA has told an adviser to review their past sales to all clients having found out they have done this.

    Let me know [STRIKE]if[/STRIKE] when you need a skilled person's report, ExpertAdvice.

    (Message to MODS - this is intended as a warning, not an advertisement!)
  • edited 13 May 2011 at 6:16PM
    VJ_VJ_ Forumite
    64 posts
    Ninth Anniversary Combo Breaker
    edited 13 May 2011 at 6:16PM
    dunstonh wrote: »
    need means financial need. Not wish. You have a financial need for contents insurance.
    I also have a financial need to (in the event of my death), cover my mortgage, any outstanding debt at time of my death, funeral expenses, air-plane tickets for family members in other countries to attend my funeral etc. ideally, I'd also like to end up in space as well - all this will cost quite a lot. Any left over will be a gift to various relatives to remember me by...
    You have a financial need for life assurance but you are choosing to go with terms that exceed that need and paying more for doing so. Are you also paying more on all your other financial needs or are you compromising on them?
    I'll be forgoing about 3 Starbucks mochas a month to pay for it, doesn't sound like compromising a 'financial need' to me.
    The average of a term assurance policy is just 7 years. Mainly as requirements change. You will have the same life policy for 40 years.
    My need will never decrease, so I looked around and saw that it's cheaper to take a large amount out now, than it is to take the same or less in my 40s or 50s etc. Keeping it for just 7 years would mean that my premium would increase every 7 years as the need will remain the same or increase.

    If my need increases, I can then talk to my insurers and see if they'll insure me at an increased amount, or take out a secondary policy with another insurer (whichever is the cheaper option). But taking out a policy of say, £250,000 at 45 would be much, much more costly than a policy of £50,000. I've fixed the majority of of any payout at the lowest possible cost - what's wrong here, how is this in any way controversial?

    Especially for the one type of insurance I don't ever want to have pay out!
    ~share and enjoy~
  • edited 17 May 2011 at 8:04AM
    oilitoilit Forumite
    234 posts
    edited 17 May 2011 at 8:04AM
    Looking for some thoughts here - from those that have actually done this rather than those that havent...

    I read earlier in the thread that setting up a trust is free - which I am guessing was really referring to policy in trust - as opposed to a physical stand alone trust.

    I have 2 kids, and want to take out two individual policies for equal amount £x payout each, thus if either i or my wife die first or have critical illness, the other party is the beneficiary.

    Now, assuming death for a minute, this would leave the remaining policy active and obviously set up to pay a dead person, so is it easier to set up a trust so that either policy pays to the surviving party and if that party is dead then it goes to the trust - or should we rely on the surviving party changing the beneficiary on their policy upon the death of the first party (i hope that makes sense !)

    The thought being - if either parent is alive then they should be the beneficiary - if not then it needs to be split between the two children.

    Its safe to assume that the payout and other items would break thru the IHT threshold.

    I find that if I speak to my accountant they point me to a lawyer for a trust, if I speak to financial advisors I use for pensions they seem to want to know everything about everything - which I dont particularly want to do. Finally, to try to mitigate risk, I am considering having the two policies with two different providers - any thoughts as to why this isnt a good route to go also welcome!

    thanks - and sorry if the opening sentence is a bit abrupt - but it looks like there are some knowledgable people on this thread - who probably have experience in these matters.
  • dunstonhdunstonh Forumite
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    I find that if I speak to my accountant they point me to a lawyer for a trust, if I speak to financial advisors I use for pensions they seem to want to know everything about everything - which I dont particularly want to do.

    What you want doesnt fall under the remit of an accountant. A solicitor can be useful if you want your own trust but they would need to know about you and you dont want to do that. A financial adviser can do it but needs to know about you but you dont want to do that.

    There are multiple trusts to cater for different scenarios. If you are not prepared to give information then you are not going to get the best advice or really any advice that is going to be helpful beyond "you should use a trust". When you ask "what trust" you will get the answer that it will depend on your circumstances. Circumstances that you dont want to give.
    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.
  • kingstreetkingstreet Forumite
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    oilit wrote: »
    Looking for some thoughts here - from those that have actually done this rather than those that havent...

    I read earlier in the thread that setting up a trust is free - which I am guessing was really referring to policy in trust - as opposed to a physical stand alone trust.

    I have 2 kids, and want to take out two individual policies for equal amount £x payout each, thus if either i or my wife die first or have critical illness, the other party is the beneficiary.

    Now, assuming death for a minute, this would leave the remaining policy active and obviously set up to pay a dead person, so is it easier to set up a trust so that either policy pays to the surviving party and if that party is dead then it goes to the trust - or should we rely on the surviving party changing the beneficiary on their policy upon the death of the first party (i hope that makes sense !)

    The thought being - if either parent is alive then they should be the beneficiary - if not then it needs to be split between the two children.

    Its safe to assume that the payout and other items would break thru the IHT threshold.

    I find that if I speak to my accountant they point me to a lawyer for a trust, if I speak to financial advisors I use for pensions they seem to want to know everything about everything - which I dont particularly want to do. Finally, to try to mitigate risk, I am considering having the two policies with two different providers - any thoughts as to why this isnt a good route to go also welcome!

    thanks - and sorry if the opening sentence is a bit abrupt - but it looks like there are some knowledgable people on this thread - who probably have experience in these matters.
    Are you asking for advice from consumers who have set up trusts, or professionals who do them regularly?

    As you can see, this is the insurance forum and this is the level term assurance thread, so any reference to a trust would be consistent with the subject of the thread.

    Any adviser - tied, multi or independent should be able to write a life policy in trust without making a charge for it. If it's an existing policy, an IFA may wish to make a charge for drawing a trust, based on the time it will take to do so. You could even get hold of the Insurer's trust form and make a decent go of it yourself.

    Discretionary and accumulation trusts would indeed be best drawn by a solicitor.

    I can understand you not wishing to disclose some information to a third party. You are at liberty to do that, although the quality of the advice you receive my be limited as a result. Advisers are required to satisfy the Know Your Customer requirements, hence the questions.

    Your single policy idea is a good one. This will ensure the survivor doesn't lose their cover on the death of the other. The other issue you mention is actually mitigated in the trust documentation. You nominate classes of beneficiary who will only benefit on a contingency.

    For example, your main beneficiary could be "my spouse at date of death" or you could actually name your wife. You would then have contingent beneficiaries, such as "my children at date of death" (or you could name your children) so in the event of her death, the children would then get the money.

    You've noted the IHT implications of having the cover and the trust is a simple way of getting the money out of your estate for tax purposes and making sure the benefits can be paid quickly and without the need for probate.
    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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