Advice about level-term life insurance

Seraphi

My partner and I both have individual life insurance/critical illness policies with decreasing term cover on the value of our mortgage which we took out years ago. Still appropriate for our circumstances now. We also have separate income protection policies which have been topped up over the years as our earnings and outgoings (predominantly related to kids) has increased.

The other half has suggested getting a level-term insurance policy (no critical illness) for each of us until we hit 70 - in addition to what we have already. The argument is that whilst our current policies cover ill health/inability to work and the mortgage in the event of death, it doesn't cover the money that we would have saved for ourselves and the kids over the next 20 years etc. The person left wouldn't have the capability of making those savings to the same degree as a single parent. I kinda see the point but am less convinced. I get the impression that we are quite well insured compared to our peers and think that we are probably reaching the realms of being "over-insured". We are in our early thirties so in fairness would be cheaper to get on with it now. If we each insure ourselves at 10 times our salary - affordability isn't an issue. 

Is this something that we should be considering and do others have something similar?

HappyHarry

If the death of one of you would cause financial difficulties for the survivor, then you should have additional life assurance. It is very common and should not leave you "over insured".

It is common for each person to be insured for different amounts, e.g. if one person contributes more towards household expenditure then they may need more cover.

If you are not married, you should look to put the policies in trust for each other, to avoid delays in probate before funds are accessible, as well as ensuring you have wills in place.

You may also want to consider income protection, which pays a benefit should either of you be unable to work from an illness or accident.

(Apologies, you did say that you already had income protection.)

Seraphi

HappyHarry said:

If the death of one of you would cause financial difficulties for the survivor, then you should have additional life assurance. It is very common and should not leave you "over insured".

It is common for each person to be insured for different amounts, e.g. if one person contributes more towards household expenditure then they may need more cover.

If you are not married, you should look to put the policies in trust for each other, to avoid delays in probate before funds are accessible, as well as ensuring you have wills in place.

You may also want to consider income protection, which pays a benefit should either of you be unable to work from an illness or accident.

(Apologies, you did say that you already had income protection.)

Thank you very much for your reply.

We are married. Though raising trusts is a good point. If both of us were to die simultaneously the insurance/assurance payout would take our children over the IHT threshold...

Weighty1

Do some basic maths (I'll make up some figures).  Say the mortgage is £1,000/month and your net income is £2,000/month.  If you were to die then the mortgage is paid off BUT the family loses £2,000.  How is that £1,000 difference (£2,000 net income - £1,000 mortgage which is paid off) covered?

If you want to keep costs down then you could consider a Family Income Benefit plan.  This would be significantly cheaper than a level term plan and it is generally quite easy to work out how much is needed, simply by doing a basic calculation, like the one above.
Personally, I think it is great that you've got income protection, critical illness AND life insurance as you are far more likely to claim on the first 2 than the latter, however, depending on how your figures work out you could still be significantly under-insured from a life insurance perspective.

Seraphi

Weighty1 said:

Do some basic maths (I'll make up some figures).  Say the mortgage is £1,000/month and your net income is £2,000/month.  If you were to die then the mortgage is paid off BUT the family loses £2,000.  How is that £1,000 difference (£2,000 net income - £1,000 mortgage which is paid off) covered?

If you want to keep costs down then you could consider a Family Income Benefit plan.  This would be significantly cheaper than a level term plan and it is generally quite easy to work out how much is needed, simply by doing a basic calculation, like the one above.
Personally, I think it is great that you've got income protection, critical illness AND life insurance as you are far more likely to claim on the first 2 than the latter, however, depending on how your figures work out you could still be significantly under-insured from a life insurance perspective.

Thank you, will look into this. General vibe I'm getting is the the other half is being pretty sensible.