Life assurance v credit card

MrsSippi

Without going into a full background (as it's a bit longwinded)....

We are a family of 4, 2 adults 2 kids aged 3 and 7. I'm a sahm as we can't afford childcare for our 2, which we would need if I worked. We currently have about 9k of debts spread across a personal loan (6.5k) and a credit card (0%, 2.5k).

We only have a tiny £200pm left each month after all bills (Inc cc and loan payments) and we have zero savings, so it's not a great situation. We don't eat out, have sky, Netflix etc. We have trimmed our outgoings wherever we can.

My question is this:

We currently pay £60pm for life assurance for DH and have done for the last 6 years. We've thankfully never needed to use it.

It's a lot of money to pay out when you don't have much in the first place! So we're wondering if it's worth stopping in the short term so that we can pay an extra £60 on our debts each month and then restart the life assurance once the debts are cleared?

But the obvious downside is that if anything did happen to DH and he couldn't work we have nothing to fall back on (except I suppose the 5k left on cc, which it wouldn't be sensible to use)

I am just so keen to clear our debts and an extra £60pm would help us to do that quicker.

Any thoughts would be welcome

Weighty1

Insurance is a complete waste of money...............................until you need to use it!

Are you going to need it in the near future, who knows?

Do you want to take the risk that if a claimable event happens then you've got no cover and have to try and get by on government hand-outs or help from friends/family?

Personally, my insurance is one of the last things I'd ever cancel as sods law means as soon as it's cancelled you end up needing to claim. I don't think you're struggling too much if you have about £200/month left over after everything has been paid out, especially if that includes the cc payments but the choice is yours.

Have you had your arrangements reviewed to see if you can get similar cover arranged at a cheaper cost? That may be one way to get the best of both worlds.

MrsSippi

Weighty1 wrote: »

Insurance is a complete waste of money...............................until you need to use it!

Are you going to need it in the near future, who knows?

Do you want to take the risk that if a claimable event happens then you've got no cover and have to try and get by on government hand-outs or help from friends/family?

Personally, my insurance is one of the last things I'd ever cancel as sods law means as soon as it's cancelled you end up needing to claim. I don't think you're struggling too much if you have about £200/month left over after everything has been paid out, especially if that includes the cc payments but the choice is yours.

Have you had your arrangements reviewed to see if you can get similar cover arranged at a cheaper cost? That may be one way to get the best of both worlds.

Thank you for the reply, its really helpful.

I suppose my sensible head tells me of course we should keep the insurance, especially as we have absolutely no savings or back up plan to fall back on.

I think its just because we are throwing every spare penny we have at our debts (which is obviously the most sensible thing to do), it just gives me the incentive to go a little bit further. I suppose as well I have to consider the fact that we have 2 young children, which changes things a bit.

I think we will persevere as we are and keep the insurance as like you say, sods law we will need it the second we don't have it, but I will look into reviewing the cover DH has and see if we can it cheaper. Every penny counts.

I suppose £200 isn't terrible, I guess it depends on your perspective. I mentioned on another section of this forum before and the general responses were drastically different to yours, shall we say!

I'm generally of the opinion that whatever we have left each month (whether it's £200 or £2,000) is what we have to work with so that's what we do. I also think that when the kids are older and I can return to work then financially we will be a lot better off and can really concentrate on building up a savings pot then.

Zorillo

We pay £34 a month for life and critical illness cover for two adults.

It's very basic cover because we're very basic people, but it would cover our mortgage if the worst happened to either of us.

MrsSippi

Zorillo wrote: »

We pay £34 a month for life and critical illness cover for two adults.

It's very basic cover because we're very basic people, but it would cover our mortgage if the worst happened to either of us.

This does just reinforce my thoughts that we at least need to review the level of cover we have, especially as it's just for one of us and DH doesn't have any medical conditions etc. I would expect he would only need basic cover.

Our financial advisor sorted it for us originally so (bad as it is) I'm not exactly sure what level of cover we have (well DH has). I will see If we can get cheaper cover.

wjr4

[QUOTE=MrsSippi;74829844
But the obvious downside is that if anything did happen to DH and he couldn't work we have nothing to fall back on (except I suppose the 5k left on cc, which it wouldn't be sensible to use)
[/QUOTE]
Life insurance wouldn't cover him if he couldn't work, only if he died. Critical Illness Cover (CIC) would pay a lump sum if he had one of the conditions listed. He needs Income Protection if you're worried about losing income, as well as the other two. Personally, I think Income Protection should be prioritised above CIC, as long as that suits you.

ACG

If you cancel it and then are diagnosed with a medical condition, you may find insurance is impossible or expensive to get in the future.

However, I can see that if you are treading water then £60 may make a big difference. Why not maybe reduce your cover, so you at least have some cover in place. If your husband passed, then not only would you have the cost of that to deal with, but you will also be down on his income. You have to weigh up the short term benefits over the longer term risks I suppose.