Life Insurance - Am I doing the right thing here?

darrenwis
darrenwis Posts: 101
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edited 30 August 2018 at 8:33PM in Insurance & life assurance
Hi.

We have a decreasing life insurance which is currently at £115000 and our mortage is at £111,000.

However, we now have 2 children and we are looking to get Level life insurace to protect them/our otherhalves if the worst happened.

Our monthly outgoing are around £1000 a month inc mortgage.

My calculations have been:

1,000 x 12 = £1200
X 21 (21 years - covered until the kids are 21)
= £252,000

This would pay the mortgage off (£111,000) and leave £141,000 to maintain the current lifestyle.

I was then going to add a sum to see them through life and university etc. So adding 48,000 would bring it up to 300,000

Looking at broker sites I can get this for around £15 a month and currently pay £10 a month for the decreasing one so i guess it would make sense to cancel that one and have it all in one.

I know Martin Lewis says 10 x salary and that would be £340,000 so i would be 40,000 out. My work would pay 4 x my salary but there it there is no guarentee i would stay there.

Am i making sense or making any fundemental errors?

Thanks.

Comments

  • dunstonh
    dunstonh Posts: 116,033
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    I know Martin Lewis says 10 x salary and that would be £340,000

    The 10x salary is an old quick and dirty method to make you think of the ballpark figure. For some it will not be enough. For others it is too much.
    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.
  • darrenwis
    darrenwis Posts: 101
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    dunstonh wrote: »
    The 10x salary is an old quick and dirty method to make you think of the ballpark figure. For some it will not be enough. For others it is too much.

    ok thanks, does my calculations make sense? i'm guessing if I died my work would pay the 4 x my salary on top of the life insurance?
  • Anyone please?
  • ACG
    ACG Posts: 23,677
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    I was always taught to cover the need.
    So in this case you would keep your current policy and then take out an additional level policy for the amount you need to cover your family.

    A cheaper alternative may be Family Income Benefit which instead of paying a lump sum, it pays £x a month.

    Various ways of doing it, there is no right or wrong way as such. It is just a case of knowing the options and then deciding on the best one for you.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Weighty1
    Weighty1 Posts: 1,170
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    Personally, I think the reasoning behind you doing it the way you are is suitable. That's not to say there aren't more cost effective ways of doing this, such as utilising a Family Income Benefit plan as mentioned above.
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