Am I going in the right direction with Life & CI cover?

ferry

We're in the process of remortgaging and and am now taking a look at our cover should the worst happen.At the moment we're under insured with a Life policy and Terminal cover with Legal & General(paying around £12 Per month) but now wish to extend the cover for joint life and CI cover Decreasing Term.

We have 2 kids and a mortgage of 16 years @115k.37 Years Old,Both Non smokers in good health with no history and in boring office jobs.

I have obtained a quote through LifeSearch who suggest a policy for this with BUPA @ £52 per month(CI with Life Mortgage Protection) ).This is a Guranteed Premium quote with £20k worth of childrens cover.

I would like some guidance on whether I am sufficiently covered and are there any other contributing factors I need to consider.
Thanks as usual for any advice..

T.

ferry

Any thoughts anyone..?

Willman_Rodders

Hi Ferry,

[Please note - I am no longer an IFA, and therefore you should not base your decision on any information contained within this post. You are recommended to seek professional advice.]

The level of cover you require is dependant upon your circumstances. When I was an IFA I tried to work out the minimum level of life cover required for all my clients to maintain their existing life style, and then any surplus resources they had were directed towards savings and investment.

When I first started as an IFA I used to calculate the level of life cover required taking into considertation a very wide range of factors. Frequently the answer was between 8 and 9 times salary - were a person did not have any savings. More experienced Advisers told me not to waste time doing the calculation; just run with a multiple of 10 x salary.

If you have no dependants you do not need life cover, other than to pay for funeral arrangements. If you have property, your house can [generally] be sold to clear any outstanding mortgage - any negative equity should however be covered by life cover.

If you have savings then an allowance should be given for these. You could simply deduct the hard core capital (i.e. the savings you never intend to spend, but just invest for growth) from the level of required life cover.

When calculating this multiple remember you may already have existing life cover in place. Take an example of a someone who has a mortgage of three times their salary, and their employer pays death in service benefit of 2 times salary.There calculation may look like this ....

3 x salary Mortgage protection plan
2 x salary Death in Service benefit from work
5 x salary Additional cover required

You can see in this example the level of additional cover required is 5 x existing salary.

If you have a partner, spouse, or dependant children, then the above is a pretty good guide.

Critical illness and income protection are recommended, but you should also consider retirement planning, savings for school education etc. Most people have limited resources (and those that don't do not need life cover anyway) so you will need to prioritise your resources.

Recommendation:
1. Seek professional advise from a suitably qualified independant financial adviser.