Life assurance - how to split?

Cotgear

My brother is 35 years of age and and I am suggesting him the below policy:

1. £50,000 life only cover for next 30 years
2. £50,000 life only cover for next 35 years
3. £50,000 life only cover for next 40 years
4. £50,000 life + critical illness for next 40 years.

The Life + critical illness is expensive (premium of £40/month). So, wondering if he should be reducing it to 30 years. So, he will be covered till he is 65 years which he is planning as his retirement age. So, any critical illness during his earning years is covered. Any thoughts/suggestions? I understand this depends on personal situation and preferences but just wondering if we are missing any important aspects.

Also, I am curious what experts have to advise on the below:
1. Is the splitting the cover into smaller ones of different years of cover better compared to taking single big policy?

2. Should we take all the policies from one company or should we take it from multiple companies to diversify the risk?

We are talking to one of the comparison sites, but they appear to be in a hurry to make us decide and not answer all the questions/clarifications. Also, they are not keen to clarify over the email but prefer to clarify on phone.

Many Thanks.
Cot

InsideInsurance

There are some basic administration costs of running/ setting up policies etc and so smaller policies tend to be less cost effective

For example:

50k for 20 years is £4.45
50k for 30 years is £5.13
200k for 30 years is £13.79

Looking at your numbers too, why would he need £100,000 life cover at 75?

As you say, life plans have to be factored in so you are probably better off getting him off to an IFA or Protection Broker who can give expert advise based on his situation and plans

Cotgear

InsideInsurance wrote: »

There are some basic administration costs of running/ setting up policies etc and so smaller policies tend to be less cost effective

For example:

50k for 20 years is £4.45
50k for 30 years is £5.13
200k for 30 years is £13.79

Splitting into multiple smaller policies has few advantages:

• We have the flexibility of reducing the coverage if our situation changes. Thus reducing the premium. If we take a single large policy then we have to cancel the large policy and have to go for a fresh new smaller policy which may be risky as premium could be higher due to age and health factors.
• We can diversify the risk among multiple providers. Ex: If all the insurance we take is from Scottish provider then any tax complications could be trouble.

Though splitting costs marginally higher, I feel it is worth the flexibility.

FFC_Me

Not sure what you are meaning by tax complications? You mention Scottish provider are you referring to any possible situation following a yes vote in the independence vote?


If you are meaning just in terms of pay out from the policies then its best and usually quite simple to have these polices placed into trust, this is another way an protection broker can assist you normally at no cost.

kingstreet

Use a "menu plan" where you can have several different strings of cover so they can be amended, removed etc. Then you pay only one policy fee.

If you are doing life cover alone, chances are the cheapest cover is with one provider anyway, so you might as well see if they have a menu plan.

Look out for additional benefits such as Best Doctors, BUPA Healthline, Helping Hand and Winston's Wish too.

dunstonh

You arrange cover to fit the needs. What needs does your brother have that sees 5 year step changes? Why does he need to go to 75?

ACG

What are you trying to protect against?

Critical illness is more expensive for a reason... your more likely to claim on it.

Take out £50k lump sums for different terms is fine in the sense that some cover is usually better than none but he might be wasting money. That amoutn of cover may not be needed or he may be better spending the money elsewhere - income protection or less life cover but more CI.

I would strongly suggest you speak to a broker as there appears to be no reasoning behind what you have suggested other than cost to say he should not have more of what he is most liekly to claim on. If a broker did what you have done it would be a complaint waiting to happen.

rs65

Cotgear wrote: »

My brother is 35 years of age and and I am suggesting him the below policy:

You could suggest that he gets proper advice. I'd bet it will differ from your advice.

Cotgear

kingstreet wrote: »

Use a "menu plan" where you can have several different strings of cover so they can be amended, removed etc. Then you pay only one policy fee.

This looks interesting. I tried to look up for the details about Menu plan but could not find anything. Is it known as something else also? Just want to google about it and know more.

kingstreet wrote: »

Look out for additional benefits such as Best Doctors, BUPA Healthline, Helping Hand and Winston's Wish too.

These seems to be part of health insurance and not life insurace/critical illness cover. I may be wrong.

Cotgear

ACG wrote: »

What are you trying to protect against?

Critical illness is more expensive for a reason... your more likely to claim on it.

He may be moving to another country and as per the adviser, if he moves abroad, the life insurance is valid but not the critical illness cover. So, if he is going to move in few years, then he can just discontinue the critical illness cover.

Cotgear

ACG wrote: »

I would strongly suggest you speak to a broker as there appears to be no reasoning behind what you have suggested other than cost to say he should not have more of what he is most liekly to claim on. If a broker did what you have done it would be a complaint waiting to happen.

Thank you for your suggestion. I have few further questions.
What are the typical charges of the broker? Though we would like to meet them personally, I guess it is common to sort it out over the phone. Are brokers more reliable, knowledgeable and regulated compared to the advisers from companies like LifeSearch etc?