Life Insurance post-mortgage

tugrin

Good Evening everyone
I have life insurance tied into my mortgage which is due to be paid off  this time next year. I am wondering what people do about life insurance in these circiumstances?? I am no spring chicken and am living on a vastly reduced income since shielding since March so there isn't a lot of spare money but I think I should have some sort of insurance for the sake of the grown up kidlets!

davidmcn

If they're grown up, why the need for insurance? Are they financially dependent on you? 

dunstonh

I am wondering what people do about life insurance in these circiumstances?

It depends on their circumstances.  

but I think I should have some sort of insurance for the sake of the grown up kidlets!

Are they financially dependent upon you?

Neil49

I stopped mine as soon as the mortgage was paid off. Treat yourself every month with the money you will save. 

The kidlets will do very well when they sell your house!

Aretnap

Life insurance is mainly there to protect people who are financially dependant on you (spouse, children etc) who would struggle financially to cope without you if you died young.

Obviously if you do have financial dependants then you need life insurance over and above the amount of the mortgage - even without a mortgage there are plenty of bills that still need paying.

OTOH if your sproglets are making their own way in the world and are financially independent (or only bothering you when they want a new car...) then your need for life insurance is much less clear. If you want to leave them a bonus when you go remember that (a) they'll already get a significant wodge of cash from the house and (b) life insurance isn't a very efficient way of doing it. All a life insurance company is going to do is work out your life expectancy from your age and health status, divide the amount of cover you want by your life expectancy, and charge you that much in annual premium, with a bit extra on top for profit margin. So on average you would be better off just putting money aside each month to serve as a legacy - with the advantage that you would be able to access it if you had dire need of it.

You may read about "over-50s plans" which offer guaranteed acceptance and ask no questions about your health. Treat them with great suspicion. They are generally very poor value - at best they serve as a last resort for people who need life insurance and whose health is too poor to get a conventional policy.

tugrin

Morning folks
And a huge thank you to those who replied especially Aretnap. I am actually so challenged in the area of understanding finance that I really treasure your very helpful and clear explanation of the situation! I realise they kids will have the house between them I suppose I was just worried by the funeral costs and - yes- the ever present ads on ALL platforms about over 50 insurance and funeral plans etc etc. They have obviously gleaned my age from data mined in t' internet and I am now a target audience!
I only have dog dependents and the kidlets would no doubt take those on if they (the dogs that is) are still around when I shuffle off. Again massive thanks - this site and those who frequent it are THE BEST

Sandtree

Is it likely, with a house to be sold and divided, that the kids would struggle to afford the funeral?

Insurance is written to make money, not only has the premiums got to cover all claims but has to also cover operational costs and the profit margin. Therefore the average buyer is worse off however the idea of insurance is to transfer the risk of something big/horrible happening for the certainty of a small amount of pain (the premiums). 

You may also want to have a look at pre-paid funerals if it is really a concern for you; some of these also offer an insurance element if you cannot afford to pay it all at once but looking at the Co-op's offering their basic package costs £3,295 if you pay today but if a 50 year old buys it as a 25 year insurance plan then they end up paying £6,255.65 for it if they live to 75. In either case however it would cover the basic funeral no matter what age you die at.

davidmcn

I doubt there are many people buying funeral plans/insurance whose estates wouldn't cover the cost of the funeral anyway - it doesn't seem a money-saving option, especially if you consider the risks of the provider failing, or the preferred funeral being something other than what was paid for, or the paperwork simply being forgotten about when the time comes decades later. Better just to leave the cash in the bank. 

Sandtree

As always, there are better and worse providers of all products.

As to paperwork being forgotten... same can happen with bank accounts as with insurances. Did stumble across a forgotten account a couple of years ago... was amazed that with interest the balance had grown to £10 or so.

Weighty1

davidmcn said:

I doubt there are many people buying funeral plans/insurance whose estates wouldn't cover the cost of the funeral anyway - it doesn't seem a money-saving option, especially if you consider the risks of the provider failing, or the preferred funeral being something other than what was paid for, or the paperwork simply being forgotten about when the time comes decades later. Better just to leave the cash in the bank. 

I looked into this a couple of years ago.  Funeral inflation is around 7% per annum so unless your assets are growing at a value in excess of this then it is an extremely cost effective way of spending your money now rather than your family having to spend it later.

davidmcn

Weighty1 said:

davidmcn said:

I doubt there are many people buying funeral plans/insurance whose estates wouldn't cover the cost of the funeral anyway - it doesn't seem a money-saving option, especially if you consider the risks of the provider failing, or the preferred funeral being something other than what was paid for, or the paperwork simply being forgotten about when the time comes decades later. Better just to leave the cash in the bank. 

I looked into this a couple of years ago.  Funeral inflation is around 7% per annum so unless your assets are growing at a value in excess of this then it is an extremely cost effective way of spending your money now rather than your family having to spend it later.

So where are they investing the money?