Life Insurance

csgohan4

Weighty1 said:

csgohan4 said:

SavingStudent1 said:

IdrisJazz said:

SavingStudent1 said:

For example, I don't want to spend too much and then not get any money e.g. policy covers till age of 50 and then I die after 50, so there is no payout despite me paying out for many years. Unless it is something small, like under £10 a month, I am happy to do that - but it is more, because money is hard to save, I don't want to be paying out high amounts like £25 per month with no guaranteed return/payout in the future.

This is why I was thinking of whole-of-life insurance but I've heard they are so expensive.

Interesting comments on getting nothing back...

Some thoughts....

If it costs £10pm to get the level of cover you want, and £25 for something that will give you something back at the end, you would be better off paying the difference into some sort of separate investment product.

That way you are paying the minimum needed for the pure cover you need, and still guaranteeing you get something back at the end. Although it's always tempting to see a return, I think it's generally better to keep your insurance and investment products separate.

Whole of life cover is expensive when you are young, as by comparison pure level term assurance is really cheap.

But you shouldn't really need life insurance beyond retirement age, as your dependents shouldn't be suffering from a loss of income as a result. There are other ways to pass on an inheritance, through investments, pensions and property, that will be far more profitable (generally speaking) than paying for whole of life cover into your eighties.

Thank you, this makes sense. Sorry, it came across a bit different to what I intended. It is more that, since insurance can be quite costly in order to get a lump sum which you'd feel covers you appropriately in the case of an unexpected event, I'd rather save that cash instead or as you mention, to invest with the potential of it growing. Although with investments, you could also face a similar situation where you could lose everything.

Sandtree said:

SavingStudent1 said:

For example, I don't want to spend too much and then not get any money e.g. policy covers till age of 50 and then I die after 50, so there is no payout despite me paying out for many years. ]

And what do you get back from your Car or Home insurance if you don't claim?

The base principle of insurance is that you exchange the possibility of a big loss (crashing your car, house burning down, you dying) for the certainty of a small loss (ie the premiums). Whilst you may think its a "waste" that you didnt knock a cyclist off their bike or die during the policy term in reality its generally a fairly good thing that these negative events havent occurred 

Whole of Life really should be called "assurance" instead, though we are lax with terminology these days, as its not a question of if you will get the money but when will you get it. On the basis that all policies other than those cancelled (eg for non-payment) pay out it is a naturally much more expensive product.

The question for you is if there would really be a monetary loss for anyone in the event of your death? Most want to cover the lost income for their spouse or kids hence term insurance tied to their hoped retirement age is a good option or pay off the mortgage to give freedom so decreasing cover matches that need. Generally if you are single, no kids its not necessary but getting cover when young and fit is cheaper than old and unwell and so some do buy a little early to avoid risk of being diagnosed with something that would make insurance hard to get. 

It used to be that life insurance and investments were packaged together but customer understanding was low and this is probably why so many think that life insurance has a surrender value etc. Modern thinking is to decouple them so you can get best in breed of both products independently 

To answer the first two questions... yes I have life insurance because my income represents the vast majority of the household and my widow wouldnt be able to afford the mortgage etc were I to die.

Insurance happens to be with Vitality (technically in part with the M&G/Pru) but thats less about "choosing them" and more about having a congenital medical condition and my broker securing best terms with them. 

Thank you, this was also a great explanation. I do understand it thank you . I decided not to go for life insurance from earlier posts, and I think it makes sense to re-evaluate this thought potentially when I have dependants, as currently there is no 'monetary' loss for anyone if such an event was to occur.

Do bare in mind, it gets more expensive the more older and potentially medical issues arise. 

I just did a similar comparison quote for my current cover 6 years on, it's almost double now for the same amount of cover. 

Don't procrastinate on something which may cost you more in the long run,

In hindsight I wished I had double my cover 6 years ago, but I had to look at costs at the time as well. 

Unfortunately though, an adviser recommending cover for someone with no financial need but a want for something just in case X, Y or Z happens in the future would be on a sticky wicket if a complaint was put forward.  I'd certainly not do it, unless the cover inlcuded some benefit for the life assured, such as accelerated critical illness cover.

Thats why I initiated it with my advisor and clear in what I want, absolving the advisor. I have also used initiation only brokers as well. My only regret is not getting more cover as the premiums now as eye watering for the same cover

Sandtree

Weighty1 said:

Unfortunately though, an adviser recommending cover for someone with no financial need but a want for something just in case X, Y or Z happens in the future would be on a sticky wicket if a complaint was put forward.  I'd certainly not do it, unless the cover inlcuded some benefit for the life assured, such as accelerated critical illness cover.

Less of an issue if its the customer requesting it rather than the advisor advising to do it...

Dont most have terminal illness cover these days and therefore would have a first party benefit

Weighty1

Sandtree said:

Weighty1 said:

Unfortunately though, an adviser recommending cover for someone with no financial need but a want for something just in case X, Y or Z happens in the future would be on a sticky wicket if a complaint was put forward.  I'd certainly not do it, unless the cover inlcuded some benefit for the life assured, such as accelerated critical illness cover.

Less of an issue if its the customer requesting it rather than the advisor advising to do it...

Dont most have terminal illness cover these days and therefore would have a first party benefit

I think the problem often lies in that advisers within an advisory firm will try and make their advice fit what the client wants.  I certainly know of at least a couple of networks that don't allow execution only arrangements.

Good point about the terminal illness benefit though, although I've never seen that used as a reason for selling a life plan to someone with no life insurance need.  It's almost a "get out of jail free" card.