Life Cover

jazmac_2

Hi all

Looking into taking single life policies out for both my wife and i, now we have a 16th month old and need to protect the family if the unfortunate should happen to either of us.

I currently have Death in service through employment but it would not cover the current morgage and i dont know what cover my wifes employer awards but as i earn more and mine wont cover i assume her's will not either if she even has death in service.

My question is once life cover is taken out say for instance with Aviva, for 25years, is that it binding untill the full term of the policy, im aware it can end early due to death, illness or policy cancalation with a posibly end early fee payable or can you swap and change to get the best deal like car or home covers.

Cheers

dunstonh

My question is once life cover is taken out say for instance with Aviva, for 25years, is that it binding untill the full term of the policy

no.

Looking into taking single life policies out for both my wife

If you have a mortgage there is no point having single life policies. Maybe single life segments on top of that for further family protection but not for mortgage.

lisyloo

You can swap your life insurance whenever you want if you are healthy.
However it might get more expensive as you get older and you certainly would not want to do it if you had been disagnosed with a health condition which would now be "pre-existing" and not covered by a new policy.
It's usually cheapest when you are younger so in general you are not going to come across cheaper deals as you get older, but basically you cancel it whenever you like.

It's not the same as car insurance as with driving you generally become lower risk with experience until you become elderly and then go down hill.
With life cover the statistical risk of death increases with age (save for any major changes like becoming a non-smoker).

magpiecottage

lisyloo wrote: »

However it might get more expensive as you get older

It's usually cheapest when you are younger so in general you are not going to come across cheaper deals as you get older, but basically you cancel it whenever you like.

It's not the same as car insurance as with driving you generally become lower risk with experience until you become elderly and then go down hill.
With life cover the statistical risk of death increases with age (save for any major changes like becoming a non-smoker).

This is not the case if you are looking for cover over a specific term and remain in good health.

Say, for example a 25 year old and a 35 year old are both in good health and need cover until they are 50. All other things being equal the 35 year old will pay LESS than the 25 year old. That is because, whilst he is more likely to have a valid claim in the next fifteen years, there is no chance that he will in the following ten because his policy will have expired whether or not he expires as well!

I see this regularly and always recommend my clients look at rebroking policies more than about four years old. (Once in force, the terms ARE binding on the insurer provided you keep paying the premiums but not on you).

A couple of things:

If you have a single life policy (i.e. on one or other but not both of you) put it into trust. This will ensure it pays out without having to wait for probate (and may avoid Inheritance Tax).

Complete and submit an "expression of wish" form to your employer indicating what you want done with the death in service benefit.

Do make Wills if you haven't already.

jazmac_2

OK thanks folks for the responses. At least i know now when i sign up im not stuck in the one deal for many many years.

one reply had mentioned that single policies were not worth while for paying out on say a morgage, i was going on the advice from this site in the insurance section that 2 single policies are often better and cheaper than a joint policy, reasons i picked up on were:

1. Two single policies, one on each of us mostly work out the same premium as a joint policy.
2. joint policy will only pay out on the first death, 2 single policies will pay out on both for the same amount being paid out on the premiums as point 1 above, obviously being crude about it and not taking into account reason of death and time between deaths etc, but basically if both my wife and i were to die our little girl would get two payouts, including death in service and therfore i think she would be able to live in comfort.

Im 32 and my wife is 30, both in excellent health, non smokers and not big drinkers.

I thought the single policies were the correct way to go.

dunstonh

one reply had mentioned that single policies were not worth while for paying out on say a morgage, i was going on the advice from this site in the insurance section that 2 single policies are often better and cheaper than a joint policy

This site does not provide financial advice and is wrong in this respect. Indeed, the article reminds me of what the insurance agents used to do 10-20 years ago. i.e. pick some numbers, multiply them by 10.

1. Two single policies, one on each of us mostly work out the same premium as a joint policy.

Mostly but not the same. Why not use the extra saving towards extra sum assured?

2. joint policy will only pay out on the first death, 2 single policies will pay out on both for the same amount being paid out on the premiums as point 1 above, obviously being crude about it and not taking into account reason of death and time between deaths etc, but basically if both my wife and i were to die our little girl would get two payouts, including death in service and therfore i think she would be able to live in comfort.

Mortgage only needs paying off once. Not twice. If you are having two single policies to cover mortgage and family protection then this indicates you are not setting up the life assurance either efficiently or accurately. i.e. does the mortgage term end at the same time as the family protection need? What happens when you move house in years to come and your term is changed and the life policy you have now is no longer suitable. You will have to change the lot rather than the bit that is different.

I thought the single policies were the correct way to go.

Not unless you want to pay more, leave yourself short of cover or get the wrong term covered or you happen to be very lucky where all your financial needs happen to run out at the same time (possible but unlikely).

You are probably better off doing a joint life segment for the mortgage and two single life for the family protection. Or a joint life segment for the mortgage, a joint life for the bit where your family protection needs are the same for both of you and a single life segment for the one with the greater need.

Break down your financial needs and the term of that need. e.g. mortgage need runs out in 18 years as one need. Family protection runs out in 23 years when child is 25. Spouse income replacement runs out in 34 years. If you used two single policies with no segments on that then you would need to go to the full sum assured to cover all those needs and for 34 years. The cost over the term would be far far higher than covering each need.