Life assurance...can you be over covered?

anxious_mum

Hi, I am new to this forum, so please bear with me.

This is probably a really stupid question, but I have been going through my papers since I became debt free, and I am tidying up, so to speak.

I have been paying for life assurance with Aviva (was swiss life when I started ) for bout 15 years, £30.00 per month. They will pay out approx £100,000 if I die (I have two teenage boys and am paying a mortgage on my house, and this amount would cover my mortgage).

I then looked through my pension plan which is provided by the company I work for. I am still on a final salary pension, which is nice, but then I saw that they will pay out about the same amount if I die whilst working for them.

My question is quite simple, but maybe a bit silly. If I died tomorrow, would BOTH of these companies pay out? Or, is it like home insurance, where you can only claim on one company?

If I don't need the Aviva insurnce, I am tempted to cancel it. What is the advice from you lovely MSE people?

dunstonh

My question is quite simple, but maybe a bit silly. If I died tomorrow, would BOTH of these companies pay out?

yes

You can have as many policies/plans as you like as long as there is an insurable need. £200k is not a particularly high amount to be paid out. using 5% as an income figure (historically safe figure to use), it would provide £10k a year. Chances are you earn more than £10k. Some of the difference would come from the pension, maybe some would your expenditure removed but depending on your financial need, it may or may not be enough.

anxious_mum

Thanks dunstonh for your reply. I may look into this then, I thought I was over insured, it looks like I am actually under insured!! I know my boys would not be destitute if I pegged it though, and that's a comfort.

rudekid48

dunstonh wrote: »

yes

You can have as many policies/plans as you like as long as there is an insurable need. £200k is not a particularly high amount to be paid out. using 5% as an income figure (historically safe figure to use), it would provide £10k a year. Chances are you earn more than £10k. Some of the difference would come from the pension, maybe some would your expenditure removed but depending on your financial need, it may or may not be enough.

And how do you plan to spend your £10k a year when you are dead? Perhaps you could spend it on spirits?

lordhaldon

Dunstonh - the previous post aside, I appreciate the frivolity but it mis demeans the inference of the FACT that £200k would produce about £10k per year! OP, is that enough for your loved ones to live on? Still think that you can be over insured? A rule of thumb is gross income x the years left until your youngest child is 21 + any liabilities. Still think £200k is a lot? I suggest that you find a good IFA or do the calculation yourself and visit a price comparison website. Well done dunstonh. Hope this helps.