Level Term Assurance Discussion

System

One other point worth making is to make sure that any life assurance you take out is put in trust. This is very simple and most companies will supply the form for you.

This will mean that the any payout is paid quicker and will avoid inheritance tax.

This should be free to do.

payless

Trusts are important in some cases - but situation is more complex with joint policies and policies with crit ill cover - as standrad Trust forms do not always cover these situations . - hence DDeaves good point about separate policies

BUT We are now in the realms of how to buy a plan.

Tied agent /bank /bs - usually more costly.

Online discount broker - cheap prices- but you need to know what you want.

Insurance intermediary/IFA - OK they take commission , but should earn it by ensuring the plan / options/ trusts fit your needs - and you never know if the case is worthwhile you may also get a discount/ rebate as well.

l-smith_2

Hi everyone

Gosh I thought I'd got this term assurance sorted in my head, now I'm more confused than ever after reading all the posts. Can anyone point me in the right direction...

Myself 34 & my partner 37 (not married) currently have a joint 95k mortage, and we are about to remortage for 118k. We have a 95k decreasing level mortagage protection cover with Critical Illness included, currently costing us £28 per month for joint cover.

Will I be better taking a new policy for 118k (quotes I've had are quite expensive with Crit Illness included) or taking a 23k top-up policy. When we took out the 95k policy the guaranteed premium seemed competative, but new quotes are very expensive. Will we be better forgetting the Crit Illness cover and taking seperate level term assurance?

Also any comments about how this affects us not being married (we keep saying we'll get round to making a will!). Current house value 400k, expecting our first baby, how would inheritace tax etc affect us if something happened to one of us? What measures should we take to protect ourselves?

much appreciated
l-smith

ddeaves

A quick reply, just based on the amount of info given, you realy need more specific advice based on your income, pension, if you have Accident/Sickness/Unemployment cover and how long you get paid if you are off work. But here goes...

Keep the Life/CI you have got, you probably won't be able to get better at guaranteed rates.

Take out two (one each) life cover for at least the difference in mortgage if not more. If one dies the other then still has some cover and it does not cost much more. Think about having at least level cover if not increasing to build in some family protection for the future.

If you want CI (i think its a great product if you buy it from the rght company) again do it seperatly for as much as you feel comfortable with spending.

WRITE A WILL NOW!!! As non married couple your next of kin is not your partner. (with your joint Life CI it won't be a problem but any other assets not held jointly will go to next of kin of deceased)

Put any seperate life cover in trust - see above posts. Make the children the beneficiaries and your partner one of the trustees. This speeds up payment, and keeps those payments out of your partners estate which could be liable for IHT if she dies or you both die together.

You may want to think about having the house set up as tenants in common rather than joint ownership. It might not save on IHT and if done wrongly can increase the IHT liability if you are still not married (but could if your wills are written correctly). Could save you nursing home fees and also make sure your children inherit even if your partner finds someone else and marries after you die(cheerfull stuff eh) Get specialist advice!!.

Regards
Duncan

l-smith_2

Duncan

Thanks for your help, I think I understand now, can you just clarify something for me.

If we keep the current 95k cover and take out 2 seperate 23k policies for the top-up amount, does it work like this....

For example if I die, both policies would pay out and clear the current mortgage balance, right? - this would leave my partner with his 23k policy. If he were then to die 2 years later, would that policy pay out (because the mortage has already been repaid?) I don't fully understand the benefit of 2 policies as opposed to joint.

thanks
leanne

ddeaves

Hi

Correct, the mortgage would be paid on first death and an additional sum paid on the second death. This is the 'family protection' element. It would help support your children. (you realy need more cover than this).

Also if the first claim is for a criticall illnes the sum assured would be paid out but that would be the end of the policy. You may need the cash yourselves rather than repay the mortgage. However having the additional cover would mean that if one of you died (after the claim on the CI policy) there would be an additional payout of £23,000 and the other would still have some 'family cover'. Seperate policies average about 10% more than joint but give twice the cover.

Hope this helps - if you want specific advice on costs let me know. I can advise but make my money on commission from policy sales. see above for buying cheap cover but don't expect too much advice.
Regards
Duncan

System

Hi just wondering if someone can answer a question for me. I emailed a company to see if they could match Cavendish the company Marin mentioned and this is the reply i got...

'The danger with working this way is the company has no incentive to deal with you in the future as they have not been suitably remunerated for future work this means that their claims procedure could be non existent. We aim to work at a cost base that allows us to be here in the future to support our clients.

In this case it is a classic case of you get what you pay for good, luck with it.'

Is this true?
If you have to make a claim do you not go through the company the policy is held with eg. Norwich Union

payless

Sounds like Sour grapes

Cavendish rebate all comm to reduce premiums (charge a small fee)
other brokers may reduce premiums (but not as much) or (like me and ddeaves ) rebate part of the commission in cash.

Long term the cavendish deal is best, but rebate may suit those likely to review/change policies regularly.

I can no afford to match Cavendish's terms (looks like neither can the brokerage you contacted)- it also causes difficulties with professional indemnity and appears the regulators generally do not like execution only. BUT Cavendish have found a market and good luck to them, so long as they can afford to process each case.

I assume the service you get from Cavendish will likely be execution only - so yes , no advice (which in some ways is minimum service- no come back / is it suitable ?/ no advice on trusts etc - although have not heard anything bad written about their actual administration) BUT as far as claims go - the plan is with the insurer (NU) and therefore the claims process will be the same.


So in all, prehaps the other broker was off the mark abit - especially if they were also execution only .

Things will change in Jan 05 when this market becomes FSA regulated.

MSE_Martin

Payless is quite right.

Cavendish simply processes the policy for you. Any claims are with the company. In my article I detail someo f the brokers that offer advice and rebate.

It does sound like sour grapes. If you got a policy and its right for you - Cavendish is essentially a shop. If you make a claim and its level term assurance - well frankly there's not that much of an argument

Are you dead?
Did you die within the term?
Did you keep up your payments?

Not really that much room for discussion and anyway thats with the life assurer

Who was this company?

payless

One point about going thro' an execution only broker - make sure you disclose all the required health bits on the appluication form (go over the top - your GP gets paid by the insurer for any report he is asked to do) as likely no neglience claim against execution only broker, if the insurers claims non-disclosure
(less likely on death claims rather more on critical illness)