4 Year Old Daughter - what do I get?

leejohnstone

Hello,

First time poster so please be gentle. I am in the market for some Life Insurance and need a bit of advice please. I have read the articles around Fixed Term life insurance and mortgage life insurance and I am a little bit confused.

I am 35 years old I have a 4 year old daughter and a wife (33) who currently stays at home to look after her. My wife will return to work when my daughter starts school in September this year. We have around £100,000 left on our mortgage so I was looking at mortgage life insurance but I also want to be able to leave University fees, driving lessons etc if I die before my daughter is 18 so this looks more like i should get level term

I work for the NHS and am in the pension scheme so would also get a death in service payment if i die.

My question is, based on my circumstances, do you have any advice please on which product to veer towards

Thank you so much
Lee

Weighty1

There are multiple ways of skinning a cat!

Good advice normally revolves around taking care of each individual need in isolation, rather than trying to cover everything with 1 single plan so on that basis you could have the following:

1) decreasing term cover to protect your mortgage (presuming it's a repayment mortgage)
2) family income benefit which provides an ongoing income until your daughter is financially independent to help cover the cost of raising her as a single parent family
3) an inflation/index-linked term assurance plan to provide a lump sum to cover things like university costs.

I generally recommend discounting death in service when arranging your own cover. This is because it is not contractually guaranteed and therefore could be changed/reduced over the years. Secondly, if you were ever to fall long-term ill and need to give up work due to ill-health then you'd lose the death in service which goes alongside your employment and at a time when it could be impossible to replace it.

Talking of ill-health, I'd also strongly recommend you at least consider income protection. Whilst you'll likely get good sick pay provisions this is only useful for as long as it last and seeing as an average claim on an income protection plan last 6-years there could be a significant shortfall in household income for a long period of time if you did become incapacitated.

tacpot12

I took the opposite approach to Weighty1; I bought level term insurance to fover everyhting knowing that as the amount owed on the mortgage drooped, there would be more left over for the family. Agree with the idea of ignoring any death in service benefits. I also had income protection insurnce.

garth549

I simply took out life insurance and calculated the figure (500k) as being enough to:

Pay off the mortgage
Provide living costs for my wife and children until they were all 18
Have enough left over to contribute to university costs

Income protection/critical illness cover is also good to have but it's a lot more expensive. I have decreasing cover of around £80k which would pay around 70% of our mortgage off.

Robin9

leejohnstone - a separate question.

Have you sorted your wills ? In the event of joint deaths - who would care for your daughter and that might be different in years to come.

Maelwys

leejohnstone wrote: »

I work for the NHS and am in the pension scheme so would also get a death in service payment if i die.

My question is, based on my circumstances, do you have any advice please on which product to veer towards

I'm in a remarkably similar situation to yourself - in my late 30s working for the NHS, with a young child to worry about and a wife who isn't working/earning as much as she used to.

Firstly - I'd definitely recommend checking your 'Death in Service' NHS pension benefits. These can be highly confusing... depending on what scheme you're in and exactly what your job entails your dependents may be due different things. However the regular officer "survivor's pension" is usually based on whatever pension benefits you've already built up; and is somewhere in the region of a 3rd of it for a spouse/partner and a 6th of it for a child. There should also be a "Lump Sum" worth about twice your yearly pay.

That lump sum is usually not going to cover paying off a mortgate. Likewise, the amount from a survivors pension will likely be rather small until you get a lot of pensionable working years under your belt.

I currently have three additional measures in place:

1. Decreasing Term Life and Critical Illness Cover (To pay off the mortgage if I die or fall critically ill)
2. Income Protection Cover (Set to kick in after the first 12 months of my NHS sick pay. To provide some income to me in case I develop a non-critical but crippling long-term illness and can no longer work. The NHS pension has a "permanent ill health" retirement option; but it's usually not enough to cover bills by itself!)
3. Family Income Benefit (To provide additional regular income to my spouse and kids in case I die or fall critically ill, on top of my NHS Pension benefits)

I only added the third fairly recently - after working out some figures for what my family would need to live on month to month if I was to die and my partner had to continue mostly staying at home to look after young kids. (Even assuming the mortage was paid off via #1, my NHS Survivor's pension wouldn't be anywhere near enough to cover the monthly bills!)

I also have around 9 months annual pay in a jointly-accessable savings account, but that's regular "buffer" funds rather than a provision for one of us passing!

My spouse is, naturally, aware of all of the above policies/funds even though she chooses to take very little to do with the family financial planning... and multiple copies of the various policy numbers and directions etc. are stored in various safe places.

All that said, one thing I tend to overlook is what would happen if my SPOUSE passed away or fell critically ill. (Thankfully I'm currently very employable and should therefore have little trouble finding a part time role which would allow me to continue to support the family... but demand for skills could change and at some point in the near future I do need to it down and have a proper conversation with her about it!)

csgohan4

Life insurance, income protection, critical illness in that order,


critical illness is a luxury imo


I saved the critical illness premiums to max out the life insurance and income protection


P.S I wouldn't depend on the death in sickness benefits. They will find ways to not cover you

https://www.ftadviser.com/pensions/2019/04/12/doctor-s-union-takes-ombudsman-to-court/