Is Life Assurance necessary for me?

Lucysauntie

Can anyone advise me on this?
I am 35, single, no dependents. I have life assurance for which I am paying £40 a month with Scottish Widows. My question is: Is it really necessary for me to have life assurance? If I died my house would be sold to pay off the mortgage. Im having a few financial worries so dont want to be paying this unless its absolutely necessary.
Thank you

peterg1965

IN your situation I would say £40 is too much to pay and you probably dont need much life insdurance if any. However if your circumstances change in the future you may need it. Premiums. of course, increase with age. £40 is a lot of money for a single person, may I ask how much cover that is for and are you a smoker? I would reckon you could get about £300,000 of cover for a 35yo female non smoker.

Lucysauntie

No Im not a smoker and my cover is for about £134,000. So £40 is definitely too much. I would imagine that critical illness is more appropriate for me?

lisyloo

Does your employer provide any life cover (or via your pension scheme)?
Don't forget that should you die before retirement then much of your pension funds should be available as a lump sum to your beneficiaries as well as your house and any savings (plus debts) you have.

I agree that you don't really need this cover AND it sounds expensive.

I would imagine that critical illness is more appropriate for me?

I wouldn't necessarily agree.
What about permanent health insurance?
i.e. income if you are off work long term.

Critical illness provides a lump sum (NO income) for only certain illnesses.
PHI provides an ongoing income until retirement if you are off sick.

You need to first investigate how long your employers sick pay scheme runs for (often they stop after 6 months) and also investigate whether your employer (or employers pension) provides any insurance. My employer provide free PHI which pays out until retirement.

I suggest you fully investigate what your employer offers before paying out extra.

At your age if I was in good health I would first set about sorting out the "financial worries" before dealing with your insurance needs.
Of course there is a risk that you might be permanently disabled and unable to work for the rest of your life before it gets sorted but I think it's a fairly small one.

dunstonh

£40pm for £134k at age 35 is very expensive. Sounds like LloydsTSB pricing rather than the real Scottish Widows product pricing.

You have no dependents so why have you got life cover? If it was sold to you, then you should put a complaint in as it shouldn't have been. This should result in an upheld complaint and your premiums returned to you with interest (I put a complaint in last year for a new client and they got just over £1300 pack).

Critical illness of permanent health insurance (PHI before CI) are the more suitable considerations.

Lucysauntie

My employer offers nothing! I work in media, we are considered to be contractors and get no benefits at all. I have a private pension but it is quite small. I had income protection for a while but stopped that as it was £38 a month and wouldnt even have covered the mortgage, plus had so many exclusions. I am tempted to scrap the insurance for the time being but am a bit worried I would have an accident, terrible illness etc etc. Just did an online quote with Direct Line and that came up as £51...even worse than the existing one!

Lucysauntie

Thanks so much for that reply dunstonh. Will look in to the alternative and will certainly consider writing to Scottish Widows/ Lloyds TSB. Any idea how much I should be paying for CI cover?

lisyloo

Any idea how much I should be paying for CI cover?

You do realise that CI will provide you with a lump sum only (which will almost certainly not last you 30 odd years) and will only cover certain illnesses??

If you are unable to work for the rest of your life, what will you live on once the lump sum has run out.

I think you need to stop and think this through.
What is it that you need?
What risks are you trying to cover?
What are the most suitable products? (probably not CI in my opinion).

we are considered to be contractors and get no benefits at all

You are either a contrator or a full time employee - which is it?
If you are a full time employee then I think you will have a legal entitlement to certain thing (like statutory sick pay) although it will be minimal.

I am tempted to scrap the insurance for the time being but am a bit worried I would have an accident, terrible illness etc etc.

Personally I would halt the insurance for a while and concentrate of sorting out your own financial situation (although you don't say what the other issues are).
As you say it is a risk but I think it's a small one and you need to priopritise (how many people do you know that have been struck down and unable to work for the rest of their lives - probably not very many).
Sorting these things out is a bit of a luxury compared with getting your financial situation sorted.
Of course you should not go uninsured forever, so you need to be discpiplined in sorting this out in a timely fashion.

jamesd

480 a year when you have financial trouble sounds like something to consider stopping, including not getting other cover for the moment. If this would allow you to sort out debt problems in a year or three or keep up with mortgage payments you couldn't otherwise pay it would be a good risk to take.

If your mortgage is not yet interest only you might consider switching to interest only at your next opportunity, or taking a repayment holiday now if your lender allows that. Both options would free some cash to help you decrease any more expensive debts that you still have while on the DMP.

dunstonh

You complain (in writing) to the LTSB branch or the Chatham office of LTSB (Scot Widows).

You should state that the adviser sold you a life policy but feel that you have no financial need for life assurance as you have no financial dependents and that the advice given was incorrect. The letter should be short and sweet. You dont need an essay.

Never get advice from banks. Expensive products, salesforce mentality and even when it has a known insurance company name, the product you are getting is a cut down, more expensive version of the full retail product (i.e. Lloyds TSB Scot Widows products are not the same as the whole of market version).

Lucysauntie

Thanks everyone. Im going to make an appointment with an independent financial advisor to work out the best options, and will definitely be writing to Lloyds about the existing Life Assurance.