Life Insurance etc

[Deleted User]

Anyone got any thoughts on the merits of taking out a decreasing term life insurance policy for myself and my wife (death and terminal illness) when I've already got Death in Service cover from work at a value of more than the mortgage? Obviously other than the fact that it's not dependent on keeping the job. Mortgage broker wants to sell us the cover of course and says that Death in Service isn't sufficient for a mortgage and it needs to be joint cover? I don't have a choice whether to take Death in Service cover, it's a mandatory benefit. My wife also has death in service cover.


I also have critical illness cover for both of us at a value just short of the mortgage, plus personal accident insurance for both. I was considering filling the gap between the critical illness policy and the mortgage amount with a separate policy.
And finally, the broker is making it sound like this is something I must take out, which I believe isn't the case as it is my responsibility to cover myself and my family.



I'm pretty sure I'm covered, just wanted a sounding board

dunstonh

Anyone got any thoughts on the merits of taking out a decreasing term life insurance policy for myself and my wife (death and terminal illness) when I've already got Death in Service cover from work at a value of more than the mortgage?

Death in service is typically no more than 4 times salary. So, for most married couples it is nowhere near enough to cover all needs. its primary function is to give a lump sum to replace lost income for a few years or replace lost/reduced pension income.

So, if you earmark your DIS against the mortgage, what you are going to have to cover your lost income and reduced pension?

Mortgage broker wants to sell us the cover of course and says that Death in Service isn't sufficient for a mortgage and it needs to be joint cover?

Which sounds perfectly normal.

I also have critical illness cover for both of us at a value just short of the mortgage, plus personal accident insurance for both. I was considering filling the gap between the critical illness policy and the mortgage amount with a separate policy.

have you told the mortgage broker about that policy? They maybe able to do a life and CI policy combined with very little cost difference.

nd finally, the broker is making it sound like this is something I must take out, which I believe isn't the case as it is my responsibility to cover myself and my family.

it does sound like you have a financial need for the policy if all you have is death in service. So, whilst it is not mandatory to have it, it is common sense to do so.

I'm pretty sure I'm covered, just wanted a sounding board

Doesnt sound as if you are anywhere near covered.

pjread

The guy wants to sell you something because it's his job. To be honest it might even turn out to be a good idea if things go wrong early on.

But I didn't bother - mostly on the basis the cost was quite high and directing the quoted premiums to mortgage overpayments would have dropped a good few years off the mortgage and as the rules stand between death in service and pension pot the mortgage would disappear if I went under a bus anyway (and still leave a 6 digit sum remaining)

I guess if it would only just cover it it's a more complex risk to take. I'd probably take it personally though.

[Deleted User]

dunstonh wrote: »

Doesnt sound as if you are anywhere near covered.

Interested to know what you think 'anywhere near' acceptable coverage is as I hadn't quoted any coverage figures?


What advice is given to FTB's these days? I thought that most were advised to take out a life insurance policy that covered the mortgage, or are they advised to obtain life insurance cover for the mortgage and then another life insurance policy to provide a lump sum for other things?


The broker was assuming that I'd only need one policy, having not asked the question about existing policies, so recommended a simple joint life/terminal illness policy. When challenged on its need when DIS seems to already cover this, that's when this notion of it needing to be a 'joint policy not provided from work' came into play. The life insurance figures were already filled in on the form I got from the broker before I even spoke to him! I guess you can't blame a broker for trying to earn his extra commission


It's the critical illness cover that I'm probably going to close the gap on. My DIS cover is 12x salary capped at £1.8m.


Directing cash towards overpayments is a good point too I guess, thanks. Every little helps in that regard and is an insurance in itself.

dunstonh

Interested to know what you think 'anywhere near' acceptable coverage is as I hadn't quoted any coverage figures?

You have only stated death in service. Say that is at best 4x salary.
You also stated you had a family and you are taking on a mortgage.
You mentioned other plans, none of which were life cover.

So, the dirty calculation is 10x income plus debts. It is possible to fine tune from there but that a good starting point.

What advice is given to FTB's these days?

Hopefully the correct advice.

I thought that most were advised to take out a life insurance policy that covered the mortgage, or are they advised to obtain life insurance cover for the mortgage and then another life insurance policy to provide a lump sum for other things?

Typically, a plan to meet each need or segments within a plan to meet each need. However, for mortgages, always joint.

My DIS cover is 12x salary capped at £1.8m.

Death in service is restricted to 4x salary. If its linked to the pension then it cannot exceed the lifetime allowance of 1.25 mill without suffering a very large tax penalty. That lifetime allowance would include the pension as well. (The lifetime allowance did hit 1.8mill some years back but has steadily fallen back)

If you have more than 4x death in service then it wont be death in service. It could be a key man policy or group life assurance plan.

Dird

You don't have to get it. I don't plan to and my mortgage has been accepted but then I don't have kids.

Does your wife work? If so I wouldn't bother with another death payment...her & the kids should survive fine living mortgage free with her salary & child tax credits to top it up

[Deleted User]

Yeah it's horses for courses, and I can see the merit of additional policies, I guess it depends on how much you deem is comfortable. To be honest I'm more concerned about the circumstances which aren't covered by either DIS or Life Insurance, such as critical illness. The cover provided by my company seems to be better value than some market quotes so far (conditions are the same, monthly cost is lower), albeit with a gap to the mortgage amount.


@dunstonh - I just checked my DIS with the company and it is 12x salary. £1.8m refers to the limit for auto acceptance apparently. Agree about the pension limits, the total payout is likely to remain tax free. Also, DIS is the name given to the 'benefit' to the employee, the policy provided to the employer is group life assurance.


Thanks folks

dunstonh

@dunstonh - I just checked my DIS with the company and it is 12x salary. £1.8m refers to the limit for auto acceptance apparently. Agree about the pension limits, the total payout is likely to remain tax free. Also, DIS is the name given to the 'benefit' to the employee, the policy provided to the employer is group life assurance.

Thanks for clarification. Conventional DIS is limited. Group life assurance is not. With 12x, you are going to be damned near that quick and dirty ideal of 10x plus debts

kingstreet

What happens if you don't die, don't get an illness on the critical illness list and can't work due to illness or disability?

How will the mortgage and bills be paid?

Protecting your income should be priority number one and permanent health insurance should be the product under consideration. It can be tailored to fit with employer sickness payments to help keep the cost down.

Better advisors are discussing this with their clients ahead of other products as the nation is drastically underinsured in this area.

amnblog

pjread wrote: »

The guy wants to sell you something because it's his job.

'Guys' who have paid cheques out to widows and people with Cancer and MS certainly consider it is 'their job'.


Unfortunately, clients are generally far too blas! about protecting themselves and their families and we often have to get quite insistent.


We don't apologise for that and we are several clients who are glad we were including one widow who my colleague chased 24 times (yes count them) to get her late husband to return a new direct debit mandate.

[Deleted User]

Indeed, another area for consideration. I have a lengthy extended sick pay that would cover me for a couple of years. Anything beyond this I think would be tackled by a lifestyle event such as selling up and moving to a different property to begin with. If it was anything requiring medical treatment then I'd hope the need for extended sick pay was reduced by having private medical cover too, though just as a catalyst rather than a cure. At the end of the day there's so many eventualities to insure for, but you are right it is an important area to at least have a plan of action for. Many people don't even consider it.