Level Term Assurance with 15 years left on term

Marmot

Hi,

I'm hoping I can get a bit of advice here as I'm a bit uncertain on what is the best course of action for me :-)

I have a Level Term Assurance policy taken out with Aviva 10 years ago with a term of 25 years. This includes Critical illness cover, Premium protection, Terminal illness benefit (automatically included) and has a Life insurance amount of £139,500.

At the time this amount was the amount of mortgage I had on a property I'd just bought.

I am now in a slightly different situation where I have moved from an expensive area to a much cheaper one so I now only have a mortgage of £35k.

I am expecting a child next year and I am trying to provision things properly so that my child would be financially provided for should I die or that I could still continue to cope financially if I had a critical illness (not particularly cheery thoughts but you have to be practical!). I am single and will be raising this child on my own.

In my current job they do not have any Death in Service payout. In the future I do plan to look for another job with a bigger company where they do have this but at the moment I must stay where I am.

I've started looking at policies via MoneySupermarket as my current policy will expire in 15 years which I don't think is long enough. Ideally I want 25 years and I think I need the life insurance amount to be higher that it currently is.

I've read somewhere that it's generally recommended to have an amount which is 10 x your salary. Is that the general rule of thumb? Or is that to cover paying off a larger mortgage amount than mine is?

As soon as I add Critical Illness to the quotes they prices start going through the roof, I am currently paying just over £49 a month.

So to summarise! I think my questions are:

1. Should I stick with my current policy & then when it expires look for another one? But by then I will be 56... :-(

2. I'm going to contact Aviva and see what it would cost to extend the term & insurance amount of my current policy but does this actually work out any better than just starting a new policy? And will insurers let you do this?

3. Should I just bite the bullet and start a new 25 year policy now (when I'm 41) - and before December when the new insurance related legislation means that policies costs may rise?

3. Can I take out some kind of additional policy which would fill in the extra bit I want to get - or is that a totally dodgy double life insurance kind of thing?!

Many thanks in advance for any help & advice!

Marmot

kingstreet

Marmot wrote: »

So to summarise! I think my questions are:

1. Should I stick with my current policy & then when it expires look for another one? But by then I will be 56... :-(

2. I'm going to contact Aviva and see what it would cost to extend the term & insurance amount of my current policy but does this actually work out any better than just starting a new policy? And will insurers let you do this?

3. Should I just bite the bullet and start a new 25 year policy now (when I'm 41) - and before December when the new insurance related legislation means that policies costs may rise?

3. Can I take out some kind of additional policy which would fill in the extra bit I want to get - or is that a totally dodgy double life insurance kind of thing?!

Many thanks in advance for any help & advice!

Marmot

1. I suggest you carry out a review of your current and future needs with an IFA. You need advice on the type and amount of cover you should have and about writing the cover in trust.

2. You cannot normally increase or extend a term assurance. You may be able to increase it by using a guaranteed insurability option (GIO) when your child is born, but you are unlikely to be able to extend it. Your plan may not have a GIO. Again, discuss with IFA.

3. Can't tell. You need to review the cover you have and compare it with the cover you need. You may wish to consider Family Income Benefit, which is cheaper than level term and income protection cover, rather than critical illness cover. The latter would replace your income if unable to work, where CI cover only pays out if your illness meets the insurer's definition and severity.

4. You can have as many policies as you like - within reason. If it is appropriate to use a top-up policy, an IFA will advise you if that is the best route and will find you the best/cheapest cover.

Ask friends and relatives for an IFA recommendation. Failing that, use https://www.unbiased.co.uk, switching off the "website/email only" option as this will then show you a full list of IFAs in your area and not just the paid-for adverts.

As an example, I'd expect a review to consider;-

- an amount of decreasing life cover for your mortgage need
- an amount of family income benefit for family protection
- an amount of critical illness cover to repay the mortgage and/or pay for adaptations to your home
- income protection cover to start paying a monthly benefit from the point your employer sickness payments stop if you are sick/disabled.

Marmot

Thank you so much kingstreet for your detailed reply & advice.

I'll look up an IFA like you suggest and get a better idea of what I need.

Thanks again

Marmot