Just how much cover!?

gpage2000

Hi all, becoming a regular on here now, but that's due to all the great help i've been getting!

Since increasing my mortgage recently, i've called Norwich Union to get a bit of a review on my life policies, and it's got me thinking...

All I currently have is a £100k level term cover, that's it, costing me £12.50 total for me and my fiancee (joint policy) - we are aged 25 and 24 (non smokers)

My mortgage now is £109K, so i've been advised a decreasing term 'mortgage' cover is best for this - which makes sense, at £8.16 per month combined for both of us (seems reasonable) over 27 years, presuming we let the mortgage run for that long.

This is the bit i may need some help and advice with; a seperate cover referred to as 'family cover' to provide a lump sum or regular payments in the event of death. We have a 2.5 year old son and a 5 month old little girl (cute!) and had been advised a 21 year cover for 300K to provide an income of around £1000 per month net just in interest, then the 300k is 'there' for anything else.

My thoughts are, is 21 years long enough? is 300K too much? Taking it that my kids are financially dependent by the age of 23 ish, what happens then when the policy ends, should I then take another policy, or would it be too expensive (I would be 49 years old then!) - the policy would then be to benefit my fiancee or mr in the event of death.

Please let me know if you would like any more details!
Thanks
Gavin

pingua

Gavin I am having the same headache as you trying to decide all this.

I think we are going to go for 100,000 life joint term guarented. I quoted for 29 yrs - we are 35. Term did not work out that much more expensive than the decreasing cover which is why I went for that. Decided on 29 yrs as again there was not too much difference - the longer the better.

In terms of the sickness and accident we will just cover hubbie for the mortgage amount. I am also going to look into the medical insurance to see if that is any different.

So if one of us dies, the mortgage will be paid which is the main thing. Part time or full time work depending on ages of kids will cover living expenses etc.

If hubbie has bad accident or sickness and can't work for months then the mortgage will be covered and bills will have to go on card/savings. Depending on how bad and how much attention he may need from me/how much he could do in terms of looking after the kids, I could go to work. Really this cover is expensive for what you get so we plan to add to savings so when we reach a set amount then we will cancel it.

It is not easy to decide how much but I think the more you think about it and get the quotes the clearer it becomes. Also how much you want to pay out for these policies each month.

So I probably have not been of too much help. But thought I would let you know what we are doing. -

clairehi

Im not sure what family cover is?

A lot depends on how much cover you can afford and are prepared to pay out.

You need to work through various scenarios and think about not just death but also loss of income due to illness and unemployment - which is much more likely than your untimely death.

gpage2000

clairehi wrote:

Im not sure what family cover is?

it doesn't as such exist! Just what the financial advisers tend to refer to cover for your family and kids... i.e. normally a term insurance to give an income afterwards




i think!

basil01_2

Hi Gavin,
If your mortgage is a joint repayment (capital & interest) then your best bet is a joint decreasing term policy for the term of your mortgage. If your mortgage is interest only or off-set (and you may borrow more on it during the term) then you should stick with a level term policy. You don't say so but looking at the cost I wouldn't think you have any critical illness linked to the policy quote. You should consider this as you are far more likely to suffer a CI than die. A provider can link these together for you in one policy.

Regarding the family protection. As you have dependents a seperate life cover for you or jointly is a good idea. The 21 yr cover is until your youngest child is 21. How much is easy to work out. As a minmum take your current monthly household expenses (less mortgage payments) times by 12 months for the annual figure then times by 20. A lump sum could provide a annual return of 5% and this could be used to provide 'income' for your dependents after your death. OK the lump sum should still be there after the 20 years though inflation would reduce the buying power.

Its best to write most policies in some form of trust so that the money goes directly to who you want to benefit from it, not into your estates.

As far as what happens once you reach 49 it would depend if you still had any dependents, spouse etc. Yes life cover only gets more expensive the older you get.
Basil

ohmsoft

If the policy is being used to support you childrens' needs 21 years seems quite sensible (but how longs a piece of string) as this gives a balance between them both being 21 and out of education with the lower premiums due to you and your partner still being young at the end of the cover.

Also seems like a good idea to have an amount of additional cover on top of the mortgage - £300K? it really is a choice, as mentioned above, as to what you can afford and what would be required. Ask yourself questions about this - will the £1K income be needed as well as maintaining the £300K balance? etc etc

I would assume if you've been advised to take decreasing term assurance that your mortgage is on a repayment basis - I only ask as you say your initial cover for 100K was level term.