£250 000 in 40yrs time good or bad pay out?

sukh38

Hi Guys

im 26 my wife is 24 we just taken out a life policy for £18.00 a month for 40 years and it will pay out £250.000 if something happens.

Lets say in 35yrs time will £250k be worth anything? someone said i should increase it just in case, as it may not be worth nothing 35yrs down the line

ACG

Let me just look into my crystal ball...

What is the £250k for?
When thinking about life cover you need to think about:
Loans (mortgages etc),
Debts,
Any financial dependents,

Then use that as a basis to how much you need. You could argue you need it increasing for inflation purposes or decreasing because your loans get smaller, children get older and so less time will be required where they will be relying on that money.

Sorry but nobody can really answer this question....if it is one, without some guess work.

Quentin

You will of course get it now if something happens.

If inflation runs riot and you find that a quarter of a million will just pay the paper bill in 35 years to come, you can always cancel it then!

(After 40 years you won't get it if you both still with us!!)

InsideInsurance

Is there no way to index link a life assurance? Thus avoid the risk of inflation in exchange for higher premiums?

ACG

InsideInsurance wrote: »

Is there no way to index link a life assurance? Thus avoid the risk of inflation in exchange for higher premiums?

Yes, not all do it but some do.

Derivative

£18 per month in savings/investments at varying rates of return for 40 years:

3% per year: £16576
4%: £21000
5%: £26836
6%: £34562
7%: £44818
8%: £58463

Something to think about.

sukh38

EdgEy wrote: »

£18 per month in savings/investments at varying rates of return for 40 years:

3% per year: £16576
4%: £21000
5%: £26836
6%: £34562
7%: £44818
8%: £58463

Something to think about.

again im new to this i no this is some kind of investment can you elaborate more?

Quentin

sukh38 wrote: »

again im new to this i no this is some kind of investment can you elaborate more?

It isn't an investment. If you both survive the 40 years you get no return.

Derivative

sukh38 wrote: »

again im new to this i no this is some kind of investment can you elaborate more?

The figures I quoted are what you would have after 40 years if you put £18 per month into a savings account or on stocks and shares (instead of the life cover).

That is what you should be comparing the £250k to - since if neither of you die, you'll get zero from the life cover.

FLAPJACK

These things are always a gamble.....at your age now, if you both survive the 40 years you will only be 64 at the end of the term which is young these days. As someone has said if you survive then you get nothing and the insurance firm keeps 40 years of premiums..which i imagine will increase each year with inflation..thats their profit.

However unfortunately we are all mortal and could go anytime in the next 40 years, so really there is no proper answer to this, except maybe it would be sensible to cover to some extent a mortgage or loans for who survives...the insurance company are hoping you survive the 40 years, whereas you are wanting the comfort that at least a payout will happen if the worst happens to either of you before then.

So it's up to you.....if you do get it though I would make sure that it would increase inline with inflation given the length of time it will run for....again though this will increase your premiums....another gamble!!

It's no crime to think of the future though.

dunstonh

Assuming the £250k if not for debt clearance but for income and pension replacement then using the 5% rule, that would give an income of £12,500 a year.

We can only assume as we have nothing to go on.