Too much cover?

Jasmine1212

Hi

Would appreciate some advice on this.

My husband and I have been working for the NHS for over 20yrs (each) so I would say we are pretty secure in our jobs.  We are also both signed up to the NHS pension scheme.
Having renewed our mortgage with a new provider, our (new) advisor suggested that we take out the following insurance:

2 x Mortgage Life cover (two separate life insurance policies)
1 x Income protection
1 x Family income benefit

That is four types of insurance!  Feels a bit excessive to me, especially as we have never had this before.  Also, the NHS has a good sickness policy and pension scheme.

Many thanks

Aretnap

That sounds like a reasonably standard recommendation. The fact that you work for the NHS changes some of the specifics of what you need, but not the basics so much. 

For example NHS sick pay is quite generous, but even that isn't going to keep paying you forever if you became long term sick. However it should be possible to recommend an income protection plan that only pays out if you are off work very long term, which would be cheaper than one that pays out if you are only off work for a month or so.

Similarly you will have death in service benefit with the NHS pension scheme - but will it be enough to support your family for 20+ years without your income were you to die tomorrow? Again you should factor it into the calculation of how much life cover you need, but it is unlikely to mean that you don't need any additional cover at all.

Is the adviser you are talking to a whole of market adviser or is he tied to a specific provider? It is nearly always better to use someone who can advise on the whole of the market than only with a limited range of products to recommend.

DullGreyGuy

Jasmine1212 said:

Would appreciate some advice on this.

My husband and I have been working for the NHS for over 20yrs (each) so I would say we are pretty secure in our jobs.  We are also both signed up to the NHS pension scheme.
Having renewed our mortgage with a new provider, our (new) advisor suggested that we take out the following insurance:

2 x Mortgage Life cover (two separate life insurance policies)
1 x Income protection
1 x Family income benefit

That is four types of insurance!  Feels a bit excessive to me, especially as we have never had this before.  Also, the NHS has a good sickness policy and pension scheme.

Insurance is ultimately gambling, as not buying insurance is too. What they've suggested feels fairly standard and if you are risk adverse could be insufficient rather than excessive. 

Everyone is in a unique position, have their own drivers and life goals, attitudes to risk etc and hence why a proper advisory broker or IFA can be more helpful and why people on here cannot give personalised advice.

Really you need to sit down and work out a whole series of "disaster scenarios" and consider how you'd deal with them... what would happen if your husband tomorrow was diagnosed with an incurable but not deadly condition that means they will never be fit enough to work again? Can you afford to live without his wage with the current lifestyle after his sick pay runs out in 12 months? Can you still make enough pension contributions to see you all into old age? If they become a wheelchair user could you afford to remodel the home for him too?

What if he died tomorrow instead? 

What if it was you rather than him? 

There are some people that want all bases covered and load up on insurance because they couldn't maintain their lifestyle if the main earner money stops, some people have plans of emigrating or something else as their solution if their spouse dies etc. Some just dont care what happens to their spouse if they die... a colleague is certainly in that space leaving everything to his son not his wife (who doesn't work) with her having a limited right to the house and money until the kid turns 21 (currently 14)

gwynlas

With a family it is important to have sufficient insurance cover as outlined above but it depends on your ages and amount of mortgage as to how much. You might not  need to duplicate amount due from Death in Service if it will already pay out enough to redeem mortgage. for example.

Critical illness cover paid off a friends mortgage when she had to leave her NHS role due to a stroke.

Within my immediate family a father of two young children died at 39. 

dunstonh

2 x Mortgage Life cover (two separate life insurance policies)

This is likely to be unnecessary.  You have one mortgage and it only needs to be cleared once. Joint usually fits the bill.  Its more common to see level term assurance or FIB split.  Less so with decreasing term assurance.

That is four types of insurance!  

Its actually two.  One is income protection and the other three are life assurance.

Also, the NHS has a good sickness policy and pension scheme.

good short term sickness but not long term.   The pension scheme only pays 50% of entitlement to spouse and only based on service obtained.    The Death in service payment is aimed at short term income loss and/or reduced pension entitlement.

DullGreyGuy

dunstonh said:
good short term sickness but not long term.   

I think this is part of the fundamental challenge for sellers of Income Protection... people think 6 months at full pay and 6 months at half pay is good long term sickness cover when thinking about having food poisoning or a broken leg. They simply dont consider that people can be off sick for years. 

Its similar to those that buy a ASU/AS policy and think the 12 months coverage is great and that even buying the more expensive 24 month cover is excessive.