Your honest opinion please

Franko43

Hi All
I’m building a new house and have a mortgage out for 150K. In a few months time I will be drawing down on the mortgage and starting to make my mortgage repayments. At this stage I will need to get some life assurance on the repayments. I’m going to post my financial status and then humbly ask you what sort of cover you would go for in my position. Death/Bad Health/Redundancy etc i.e what level you would come in at. There are so many companies out there selling so many different products I’d just like a second opinion.

Mortgage repayments = £1,000 per month
My net monthly wage = £1,800
Wife having first baby in November, on maternity leave for next 9 mths. Wage = £900 per month
Savings – 7K ISA Shares, 3k Cash ISA

I’m 34, job is relatively secure for next 18mths anyhow. Keep in good shape.

What cover would you go for??

fox_2

Tesco is pretty good right now. Only £7.70 / month with £100,000 cover for someone your age (provided you dont smoke)

lisyloo

What does your employer provide in term of sick pay (both short and long term)?
what would your redundancy package be?
Do they provide death-in-service benefits?
How quickly could you find another job realistically?

Franko43

NHi lisyloo - not so sure in terms of sick pay, redundancy - good Q. Think I might get nothing as it's in my contract to relocate (which I can't do)
Could find a job pretty quickly but would be taking a 50% earnings hit for 1st 6 mths until I got something better. I work in IT and there are very little IT jobs in my area, my skill set is very much specialised (which I'm trying to address)

lisyloo

I think you need to find out what your employer offers.
Look in our contract, handbook, ask HR etc.

I would defnitely want life assurance in your situation to at least pay off the mortgage, but you also need to consider what your partner would live on. Some advisors would say you need 10x salary if you have young kids.

There always has to be a trade-off though between cover and cost.

bear in mind that any pension funds you have should pay out on death either a lump sum or a pension for your dependents.

For sickness, often people have 6 months cover at work, but after that it's state benefits, so you should consider a PHI policy (permanent health insurance). This pays out an INCOME if you can't work. It's not the same a private medical insurance that pays for medical treatment or crtical illness that pays a LUMP sum if you get a very limited set of conditions.
If you are very stretched you need to consider whether you should "wing it".

For redundancy you may decide to "wing it" as at least you can find another job (as opposed to being dead or sick).

Really it's down to what you think it's worth paying for given the chances of these things happening.
Try to imagine the consequences.
e.g. if you are long term sick then it means living off state benefits which means possibly loosing the house.
Are you prepared to take that risk?
Some people are.

Again first check what your employer provides.
Mine provide PHI until retirement and a decent redundancy package so I don't need either of those.

You can check your redundancy packagae by checking your contract and/or checking the statutory minimums on something like google.
You contract may be better than the statutory minimum.
It's quite heavily linked to years of service.
Bear in mind you will also have a notice period and maybe some savings.
Also bear in mind what the policies offer.
Redundancy cover often only pays for a year.
Critical illness ony pays on certain illnesses and PHI pays out until retirement.

You have to weigh up the cost, the cover, the risks and the consequences.
No siple answers I'm afraid but definitely check what your employer does and what is provided by your pensions on death. There is no point paying for something you already have.

Franko43

lisyloo - I done a bit of homework. Here's what they are going to implement over next 6mths@

<LI class=MsoNormal style="mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; mso-list: l0 level1 lfo1">Shareholder Incentive Programme (SHIP) - enables you to invest in the Company through buying shares monthly through deductions from your salary. The Company will match your monthly contributions from salary. Max employee contribution is £100. <LI class=MsoNormal style="mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; mso-list: l0 level1 lfo1">Pension - Group Personal Pension Plan. If you elect to join, the Company will pay employer contributions to the Plan at the rate of 7% of basic salary, you can then elect to pay member contributions and benefit from additional employer contributions (potentially an additional 3%) <LI class=MsoNormal style="mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; mso-list: l0 level1 lfo1">PHI <LI class=MsoNormal style="mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; mso-list: l0 level1 lfo1">Flexible benefits - currently under review, but likely to cover PMI, dental insurance, childcare etc as in current scheme <LI class=MsoNormal style="mso-margin-top-alt: auto; mso-margin-bottom-alt: auto; mso-list: l0 level1 lfo1">Life cover - 4 times salary on death in service