Insurance/ Assurance review

$17mma

After reading some of these threads I realised that my husband and I were considerably under insured :eek: I have done some homework (need some feedback from the FA gurus please )

So I decided to change our policies to the following

2 x Level Term Insurance
2 x PHI

I figured seperate policies would be best in the event we both die a joint policy would only pay out on the first death whereas if we both have seperate policies both insurances would pay out and the kids would be better off one insurance paying off the mortgage and the other just paying out... is that correct?

We have chosen PHI because our income is the main deciding factor, standard of living wise, and should that cease or drop we want to ensure that we can still maintain our standard of living.

Though both of our employers offer the following. In fact husbands employer is offering more than mine. :cool:

SICKNESS

4 months full pay & 4 months half pay ( husband entitled to more) though have saved nearly 6 months expenses emergency fund :money: hope to make it 12 by summer next yr.

PERSONAL ACCIDENT

Up to five times basic salary in the event of:-
- death (occurring within 12 months of accident); or
- permanent total disablement from usual occupation

The above payments are separate from, and in addition to, any
Pension Scheme provisions, which may be in place.

LIFE ASSURANCE / DEATH IN SERVICE

lump sum payment equal to twice the basic salary (including any London Allowance). Will also consider making payments in respect of
Accidental Death or Bodily Injury sustained whilst on official
business, including commuting.

The above payments are separate from, and in addition to, any
Pension Scheme provisions which may be in place.

PENSIONS

Pensions - A temporary pension is payable equal to my basic salary at
the date of death. The period for which this temporary pension is payable
is usually 3 months and is payable for widower and children. Thereafter a
widowers and children's pension are payable based on the pension I
would have received if retired in ill-health on the date of death.

The widowers pension is payable for life. Children's pensions are
payable until age 17 or 21 if in full time education.

Pension payments are made monthly.

So I am I correct in assuming that the 2 x Level term and PHI are sufficient? considering the sick pay entitled to should i take out unemployment only MPPI?

All feedback appreciated.:beer:

$17mma

Are there no FA Guru's that can comment on the above?

lisyloo

It is really dififcult for people to answer the question "is it enough"?
which is probably why you havent' had many replies.

The amount you need or want is dependent on your cirucmstances, for example I have no kids but you do so clearly you need to provide for a carer after the death of the carer (or replacement salary if other person gives up their job to care).

I work in IT and my experience so far is that redundancy is far more likely to happen than long term sickness.

What you need (or want) depends on a number of factors including
a) your likelihood of getting another job quickly
b) your likeihood of getting made redundant
c) your length of service (which relates to your redundnacy package)
d) whether you have kids and your plans for childcare post sickness/death of either parent

To me it looks like you are planning on having plenty of insurance.
Personally I go for a lot less and "wing it" a bit but it's completely different if you have no dependents.

Bear in mind that any insurance you pay for is reducing your ability to save for retirement or a rainy day.
So it's very much a trade-off rather than trying to get as much as possible.
There is no right or wrong answer.

You have to think about what would happen in each case (death,sicknes, redundancy) and what you would do i.e. who would care for the children.
Once you know this then you can work out how much you need in each case.
From what I can see you are working along the right lines.

You could speak to a Financial Advisor but obviously bear in mind that they have an agenda to sell you as much as possible and this isn't necessarily the right thing to do.
If you have dependents then it's probably better to be safe than sorry but paying for insurance you don't need ultimately affect how much you can save, put in pensions and pay off your mortgage.

dunstonh

You could speak to a Financial Advisor but obviously bear in mind that they have an agenda to sell you as much as possible and this isn't necessarily the right thing to do.

Thats a very harsh statement to make. Most certainly do not have that agenda although some will inevitably exist. In these days where claims companies are more than happy to rip apart recommendations, anyone not using justifiable figures in their calculations wouldnt stand a chance. I take a little (only a little) offence at comments like that as I am sitting here with over 5 applications on my desk, all arranged with discount terms ranging from no initial commission taken to just small amounts to cover a pre-agreed fee. In those cases, selling as little as possible would be better as it would reduce the workload.

I havent replied yet as it needs a long response and I dont have time right now. I also have compliance concerns as this is really crossing the line to actual financial advice and that could put me and the board in trouble with the FSA were someone to report it. Generic advice and discussion is fine but this is a little too specific.

I will state that you should be considering pension term assurance as a possible option in place of the level term assurances.

$17mma

dunstonh wrote:

I will state that you should be considering pension term assurance as a possible option in place of the level term assurances.

Pension term assurance? not sure what that is, will have to do some more home work.

lisyloo

Thats a very harsh statement to make.

No offence intended to you or anyone else.
I am just pointing out that the fact that the advisor is (often) dependent on someone taking out policies to get paid MAY influence their decision.

I speak as someone who has won at least 4 complaints against the financial industry.

Of course they aren't all bad so I certainly wouldn't want to tarr everyone with the same brush but if we look at the facts the industry as a whole has "mis-sold" thousands of endowments and pensions.

I'm sorry if you take (a little) offence.
It is certainly not aimed at the individuals here who generally respresent the honest end of the business but I don't believe your industry has a good record in general.

Supernova

So, how much is reasonable commission on level term assurance arranged by an IFA? And how would it affect premiums on say a joint life 6 year level term at £13 a month for £56000 cover as quoted by someone like Torquil Clark?

dunstonh

I speak as someone who has won at least 4 complaints against the financial industry.

I speak as someone who has never had a financial services complaint - find some wood quick!!!

Of course they aren't all bad so I certainly wouldn't want to tarr everyone with the same brush but if we look at the facts the industry as a whole has "mis-sold" thousands of endowments and pensions.

80% of advisers trading today have never had a complaint according to the FOS. You would also have to argue that most endowments were not truely mis-sold but it was allowed to turn into a gravy train for a lot of individuals.

So, how much is reasonable commission on level term assurance arranged by an IFA?....

£13 on full commission would equate roughly to £11.50 on nil commission.

It isnt as easy to compare commissions though as pricing on life cover varies with different IFAs. I have a couple of times compared pricing on nil commission basis against Cavendish for example and found myself cheaper. That indicates that they are not getting best rates from some providers. However, I wouldnt transact on the basis they do unless it was a regular client.

jasonking

We seem to have gone off on a tangent here ladies and gents. I agree with Dunstonh that the original post is too specific for this board. My advice to $17mma is to seek advice from a suitably experienced IFA and then come back to the board with any questions this might raise. You should consider whether you want to rely on your employers DIS benefits...are there any plans to change employers in the future? You should also consider using a trust and updating your Will, which are all issues a good IFA will consider with you.

lisyloo

We seem to have gone off on a tangent here ladies and gents.

I agree.
The points have been raised, lets leave it at that for OP to make up their own mind.

You should consider whether you want to rely on your employers DIS benefits...are there any plans to change employers in the future?

My view is that it's quite acceptable to use employers benefits provided you are aware that you must review if you change job.
It's very expensive to ignore them just because you might possibly change job at some undefined date in the future.

Sharpie

$17mma wrote:

After reading some of these threads I realised that my husband and I were considerably under insured :eek: I have done some homework (need some feedback from the FA gurus please )

So I decided to change our policies to the following

2 x Level Term Insurance
2 x PHI

I figured seperate policies would be best in the event we both die a joint policy would only pay out on the first death whereas if we both have seperate policies both insurances would pay out and the kids would be better off one insurance paying off the mortgage and the other just paying out... is that correct?

Yes, two separate policies are generally best, but you should make sure that you put them into TRUST to make sure that the money goes to your spouse (and vice versa), and then your kids if you die...online companies that deal direct sometimes do not offer trusts as they require advice...This is where an IFA can help.

As dunstonh says, you could consider pension term assurance, or family income benefit (generally better value than level term)..

If you take out unemployment only mortgage protection, then read the small print carefully- some comapnies expect you to sign on and be in receipt of jobseekers allowance before they will cough up any benefit..which does not suit everyone.