* Life insurance for parents of 3 kids - help please *

CharleneUK

Hi there, can anyone tell me if there is a particular way in which you calculate the life insurance payout you'd want to receive?

I'm wondering if everyone visits a financial advisor to work out the likely amount, or if people just pluck a figure out of the air?

As silly as these questions sound, hubby and I want to take out a policy ASAP and cannot believe we've left it this long.

Any help/advice much appreciated.

dunstonh

Hi there, can anyone tell me if there is a particular way in which you calculate the life insurance payout you'd want to receive?

You calculate the amount you would be worse off by. This would be the amount of all debts and liabilities as a lump sum. For income purposes you would look at the required level of replacement income and either take out a family income benefit to replace that or use a term assurance with a sum assured that will generate enough income at 5% to cover the need.
You can tweak that a little to allow a greater withdrawal to erode the capital over the need period but I personally prefer not to.

lic

When you've decided how much cover you need get a few quotes off the internet. once you've got one go to
https://www.cavendish.co.uk
They will beat any quote you have got, because they do not charge commission. With most polices you pay commission with every payment, with Cavendish you do not.

ritac1

I am in a similar situation.

A single parent with youngest children at 13yrs old. I have been looking for some Life Insurance for the next 10 years so that if I were to die then my older children (18 and 19 yrs) would have something to look after the younger ones with until they were old enough to look after themselves.

There is no mortgage on my home but everything else would need to be paid as usual until all the children were old enough to make alternative living arrangements and the house could be sold - releasing lots of money - lucky them !!

Should I still be here after the 10 years and the policy expires then I would like to get something back from it, perhaps having used it as a saving device of some kind.

My head is spinning with what appears to be all the options I may have. Since I have never had life insurance before I am completely in the dark and wonder if anyone could point me in the right direction and particularly what type of policy should I be looking for. Someone mentioned a with-profits endowment - if appropriate for my needs - would I be able to get one for a term of only 10 years with a relatively small monthly layout - say £20 max?

Thanks in advance for anyone willing to give advice.

dunstonh

Should I still be here after the 10 years and the policy expires then I would like to get something back from it, perhaps having used it as a saving device of some kind.

If you want life cover, you should arrange life cover. If you want savings, you should arrange a savings plan. Trying to get both in one plan is obsolete as it is inefficient and expensive and you end up with a fudge that neither gives a high enough sum assured or a good enough savings pot. The policy type you are talking about is called low cost endowment. Do you really want an endowment policy?

Someone mentioned a with-profits endowment - if appropriate for my needs - would I be able to get one for a term of only 10 years with a relatively small monthly layout - say £20 max?

That someone hasnt got a clue. So, you should disregard what they say. That is about the worst thing you can do.

I am completely in the dark and wonder if anyone could point me in the right direction and particularly what type of policy should I be looking for.

You may need a family income benefit or a level term assurance. Possibly even a decreasing term assurance depending on your needs. The sum assureds should match your requirements but dont forget to take your pension into account as that could reduce the amount you need.

Thanks in advance for anyone willing to give advice.

Advice on life assurance is a regulated area and you will get no advice here. Even from those of us authorised to do so as we would breach FSA rules if we did and put ourselves and possibly the board at risk. You get discussion and comment only. (need to add that statement in for compliance reasons whenever someone mentions the "advice" word on a post I am responding to).#
If you dont have a clue what to do then get an IFA to see you to arrange a suitable policy.

silverfoxuk

So, if for example I calculate that £1,250 a month (£15k per annum) would be sufficient for the family to get by on in the event of my death, I can either set up a FIB policy where the insurer will pay this sum out every month until the end of the term
OR (using dunstonh's 5% figure)
Arrange a life policy that pays out £300,000 on death (decreasing term). I suppose then my spouse would need to arrange to deal with the £300,000 to ensure she could eek out the regular income for the required time.
Any major pros cons to either eay of doing it? (Asking my wife she said she would prefer to get the cash lump sum up front. Hmmmm.)

ritac1

Thanks for the response,

seems like I cannot get what I am looking for then if I cannot get some kind of life assurance that will pay out at the end of the term without losing any money.

I am 47 years old so by the time my youngest are old enough to look after themselves I wont be at retirement age.

Will have to have a rethink about what to do. Probably look into the Level Term Assurance or Decreasing Term .....

Thankyou for taking the time to help me, it certainly made things a lot clearer.

CharleneUK

Thanks a lot for the post in this thread, very interesting! I think I'll see a financial advisor though, just to be sure I'm doing the right thing!

Cheers and best of luck to all.