Company Life assurance and getting older

Supernova

In his article Martin says you can deduct the amount covered by your company scheme from the 10 x salary recommendation.

My company covers the full amount (£500K - and it is discretionary so apparently it escapes IHT) so I have two questions:

1. Do I need to replace £57K mortgage cover for the remaining 6 years currently covered by an endowment if I sold the latter?

2. I'm 48 (today!) - what attitude should I have to the risk of being made redundant in the future and then being that much older in terms of replacing that insurance, depending on future employment of course. I have a bit of a medical history which means my GP would be contacted.

Can company benefits be a bit double-edged in that way sometimes?

Ta!

dunstonh

1. Do I need to replace £57K mortgage cover for the remaining 6 years currently covered by an endowment if I sold the latter?

Unlikely. Nowadays, most lenders do not insist on it. Although a few do. Whether you have a financial need or not depends on your circumstances.

2. I'm 48 (today!) - what attitude should I have to the risk of being made redundant in the future and then being that much older in terms of replacing that insurance, depending on future employment of course. I have a bit of a medical history which means my GP would be contacted.

Personal opinion only. Its how you feel about the subject and people will have different views. A lot of it will depend on your retirement planning and assets that would be left to spouse/partner.

In his article Martin says you can deduct the amount covered by your company scheme from the 10 x salary recommendation.

10x is a crude calculation and similar to one used by tied agents in the days before computer. It wouldnt stand up to close scrutiny and chances of it being accurate are very slim.

Astaroth

How are you supposed to work out what is suitable cover? At present I & partner are in rented accommodation with monthly rent approx £800/month. Only outstanding finance is £120 on a sofa but that is paid off 19th of this month so not much of a concern and a student loan (the official sort, pre coming out your salary type) of about £3000 but I believe this automatically "dies" with you rather than having a claim against the estate.

I currently only have my work life assurance which is about £360,000 if memory serves me correct - it is tied into my "pension" payments (have been told it is some saving vehicle and not a true pension but remains tax free as a lump sum as long as you purchase a pension or annualty type thing when it "matures") so in itself not optional but the pension is optional.

It feels to me as it should be plenty... have no dependants and £360k would get the misses a reasonable enough property and some money to spare (she works full time and has an acceptable salary).

Never really thought about if I should be increasing it another way

dunstonh

How are you supposed to work out what is suitable cover?

Any half decent adviser would have software to calculate it. That software is basically a front end for the data which anyone who uses excel could recreate for themselves.

Its knowing what to include and what not to include that matters and that is often simple logic. Debts, assets, costs and future requirements. Then top it off with a 5% income against the capital figure. i.e. £400k at 5% = £20,000 income

So, someone needing a spouse to have a £20k net income and all debts cleared would look at the pension income that would be payable, existing investments etc, and take into account debts being cleared.

Of course, IHT needs to be looked at very carefully as you dont want to take out £400k of life cover only to see £160,000 of it go to the Govt because they didnt use a trust. (pensions currently being a master trust so no problem on first death but could be on second).

Astaroth

dunstonh wrote:

pensions currently being a master trust so no problem on first death but could be on second.

Thats ok... only intend to die once

dunstonh

lol.

Second death of course being the term used when looking at a couple. That is when IHT takes the bite for most estates as its moving down to the children. Life policies in trust to children can take money out of the estate and not have it hit for IHT.