Life insurance - help!

Louise1234

Ok, so I have never needed life insurance before but we get the keys to our first place on Monday.

I dont really understand all the options. How do you know if its a good deal? How much do you pay?

We got a quote from our mortgage broker but think I have seen cheaper online.

What type is best to get?

I think we want a non decreasing payout of the mortgage amount £306k. With critical illness for both. Not fussed on income protection or sick pay one as would be ok.

Is there anything else we need?

ANY help would be greatly appreciated!:rotfl:

Thank you

glosoli

The amount you will pay for Life and Critical illness cover will vary massively depending on a number of things including age, occupation, smoker status, amount of cover etc so there is no standard premium as such.

A common mistake people make when comparing cover they have seen on a comparison website to cover which has been recommended to them is the fact it is rarely a like for like comparison. Good cover will actually pay out if you find yourselves in a position of having to make a claim.

tacpot12

You should consider what other life cover you have, e.g via death in service cover at work, and what cover you might need in the future - life insurance is cheapest when you are young, fit and healthy.

I would recommend you take out the level term insurance you suggest. You will have to decide if you will take out two single life policies or one joint life policy. If joint life, you will need to decide if you want it to payout on the first or second death. A joint life policy should be cheaper than two single life policies but will only payout once.

I have £310k cover from Legal & General that I pay £23/month for but I took this out when I was 40.

getmore4less

Start with what risks are you trying to cover?

kids or no kids makes a difference.

No kids.
these are the 3 main ones

one of you dies

can the other afford the mortgage and living costs.
Could they just down size,
Would they move anyway.
...

Loss of one/both incomes

how long could you go without some other income source?


the biggy
one of you becomes unable to work and needs care
Will the other person be willing able to do the care what income will be needed

In that scenario the cover needs to be sufficient to cover loss of both incomes for both parties becoming incapacitated.


you have to be a little careful relying on work based cover because that can disappear quickly and may not cover the worst case scenario.

kingstreet

Louise1234 wrote: »

I think we want a non decreasing payout of the mortgage amount £306k. With critical illness for both. Not fussed on income protection or sick pay one as would be ok.

What happens if you get an illness/disability which prevents you working long-term but isn't serious enough to cause a critical illness payout?

How do you pay your mortgage? How do you pay your bills? What aspects of your lifestyle are you going to live without?

dunstonh

I think we want a non decreasing payout of the mortgage amount £306k.

That would be the case on an interest only mortgage. However, with a capital and repayment mortgage, you would want a decreasing term assurance.

We got a quote from our mortgage broker but think I have seen cheaper online.

Online will always be cheaper. However, dont assume these things are like for like. Especially when it comes to CI cover. The cheapest ones are cheap for a reason. They cover less. The broker would do some filtering and will typically disregard the rubbish that you will see at the top of a comparison site (such as yearly renewable term assurance). Plus, many people mix up CI cover with TI cover. It is not the same thing.

ALostMachine

kingstreet wrote: »

What happens if you get an illness/disability which prevents you working long-term but isn't serious enough to cause a critical illness payout?

Would you recommend income protection over critical illness?

kingstreet

IMHO it should be given a higher priority.

It's just not sexy enough. I'm sure CI is sold on the basis you can have a lottery win lump sum and be back at work five minutes later; while IP is the drudge of just paying your bills and having a decent lifestyle for the next 30 years...

Trickzyy

kingstreet wrote: »

IMHO it should be given a higher priority.

It's just not sexy enough. I'm sure CI is sold on the basis you can have a lottery win lump sum and be back at work five minutes later; while IP is the drudge of just paying your bills and having a decent lifestyle for the next 30 years...

I agree with this too. Critical illness is great and pays out a lump sum to clear the mortgage, but you will still require money for day-to-day living too if you haven't recovered from that illness.

A CIC policy may payout £300k in a lump sum, but if you take an IP policy out when you are 30 until the age of 65 and earn £25k a year, you will get a benefit of 55% of that salary which is circa £1,150. If you times that by 12 and then by 35, you can potentially get a maximum payout of £483,000. IP is generally cheaper than CIC but this will depend on several factors such as occupation, age, deferred period etc.

The ideal situation would be to take out both covers - CIC clears the mortgage and IP gives you a regular monthly income, but this is not always feasible due to cost.

minimike2

ALostMachine wrote: »

Would you recommend income protection over critical illness?

I have both, as well as WOL, but was in the fortunate position to be able to afford to do so.

All play their part for different things. The way I look at it is that it it great if the mortgage is paid off, but whats the point if you no longer have an income and can't afford to maintain the place. At least with IP you can still keep paying everything. My IP is also 50% the monthly premium of my CIC.

Make of that what you will..... You will need to see a broker / IFA for proper advice on your situation.