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Dilema: Term or Family Income

triplea35
Posts: 339 Forumite


Hi, I have just been trawling the net to find a good deal.
I currently have £150,000 term with Equitable Life which has 13 years to run. With Cavendish I found that I could significantly increase the insured amount or extend the term for the same monthly payment and I decided to extend the term to 22 years which is up to my 70th year.
I was really pleased with myself and had just completed the application form when I came across Family Income Benefit. Again for the same monthly payment my wife can get £20,000 per year up to the end of the 22 year term.
I understand the basic principles of both policies. You could never hope to get anywhere near £20,000 per year from the capital sum invested so if I died early in the term the income benefit would be by far and away the best policy. However if I died late in the term ie 68 then the family income benefit would pay out little but the term would still payout the full £150000.
So which is the best?
Is it just a matter of personal preference or is there some form of calculator to work out which is best based on average life expectancies etc.The benefits of the family income significantly reduce towards the end of the term when I presume the risk of death is greatly increasing. Hopefully I'll live past 70 so it would be academic but just can't make my mind up.
Both policies are with very reputable companies
Greatful for any input..
I currently have £150,000 term with Equitable Life which has 13 years to run. With Cavendish I found that I could significantly increase the insured amount or extend the term for the same monthly payment and I decided to extend the term to 22 years which is up to my 70th year.
I was really pleased with myself and had just completed the application form when I came across Family Income Benefit. Again for the same monthly payment my wife can get £20,000 per year up to the end of the 22 year term.
I understand the basic principles of both policies. You could never hope to get anywhere near £20,000 per year from the capital sum invested so if I died early in the term the income benefit would be by far and away the best policy. However if I died late in the term ie 68 then the family income benefit would pay out little but the term would still payout the full £150000.
So which is the best?
Is it just a matter of personal preference or is there some form of calculator to work out which is best based on average life expectancies etc.The benefits of the family income significantly reduce towards the end of the term when I presume the risk of death is greatly increasing. Hopefully I'll live past 70 so it would be academic but just can't make my mind up.
Both policies are with very reputable companies
Greatful for any input..
0
Comments
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assuming you mean you can't invest the lump sum to get that level of "interest"
You can't just take into account the funds returned on the capital sum, as you have to take the remaining (untouched) lump sum into account as wellAny posts on here are for information and discussion purposes only and shouldn't be seen as (financial) advice.0 -
Yes your right ,thats what I meant. It justs make it all the more complicated trying to consider if she could live off the interest from the lump sum(together with her own income/ my pensions etc) or whether the lump sum would be eroded . Similarly what amount of the yearly income could be invested.
I was more interested on which appears to be the best deal 'financially' though I suppose personal circumstance has to come into it.0 -
I have nothing to prove it, but someone else said that most policies FIB polices claims get commuted ( swapped for lump sum) anyway.
suppose it would be fairer to compare what you could buy on a decreasing term to a FIB rather than level term to FIB.
(only true way would be to then compare using fixed term guarntted annuity rates )
That said if affordable I would personally go for level term.
Theres a lot on competition in level term market - so perhaps mafgins are kept down ? ( although perhaps the marketing people think otherwise- more common- charge more )Any posts on here are for information and discussion purposes only and shouldn't be seen as (financial) advice.0 -
Thanks for that Payless0
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Yes confirmed that the vast majority of FIBs get commuted to a lump sum at a loss to the beneficiary. However, beneficiaries tend to prefer lump sums.
This is one of the reasons why FIBs have become less common nowadays.
Plus, remember if you die in the later years of an FIB, you get a much reduced payout than a term assurance.
Term assurance is more desirable. FIB is more of a budget option.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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