How many life insurance policies to have??

livewire82

Hi all

I know there is no right or wrong answer to this but I'm currently reviewing the insurance policies we have in our household because money is tight and I'm questioning whether I'm going overboard with life insurance.

Combined, me and my partner earn around £78,000 per year. We have a fair amount of debt and feel like we're living hand to mouth a lot of the time so I'm considering some cuts in out outgoings.

We're both around 40 years old, generally of good health, and have never made a claim. Currently we have:

Me:
Life with critical illness cover of £50,000 with £25,000 cover for children: £30
Relevant life cover £350,000: £27
Income protection £1,150 per month: £10

OH:
Life with critical illness cover of £50,000 with £25,000 cover for children £25
Life term life cover £300,000; £15

We also have a buildings, contents, home emergency and legal cover package totalling £34

According to Google, 30% of people don't have any life cover so I wonder if having this much in my current financial situation is wise. I'm looking to understand what others have and to get an opinion on this.

SK226956

I have never taken out a life insurance, income protection policy. I don't consider it value for money at all. There are state benefits (along with few other) to fall back on should the worst happen.

marcia_

SK226956 said:

I have never taken out a life insurance, income protection policy. I don't consider it value for money at all. There are state benefits (along with few other) to fall back on should the worst happen.

 State benefits won't pay off your mortgage should you die leaving your partner with a significant debt whilst relying of minimal benefits. 

 Nor will they cover your partners lost income should you or they need to leave work in case of terminal illness or to care for children. 

Emmia

We each have life with critical illness that will pay the mortgage off (and a bit) in the event something terrible happens. 

It was a hefty mortgage which would have left me in particular needing to sell quickly if no insurance had been in place.

Now, we could both afford it alone as we've paid it down, but that forces the survivor to need to work - rather than offering a choice not to, or to have a break. Benefits wouldn't cover the mortgage.

DullGreyGuy

livewire82 said:

I know there is no right or wrong answer to this but I'm currently reviewing the insurance policies we have in our household because money is tight and I'm questioning whether I'm going overboard with life insurance.

Combined, me and my partner earn around £78,000 per year. We have a fair amount of debt and feel like we're living hand to mouth a lot of the time so I'm considering some cuts in out outgoings.

We're both around 40 years old, generally of good health, and have never made a claim. Currently we have:

Me:
Life with critical illness cover of £50,000 with £25,000 cover for children: £30
Relevant life cover £350,000: £27
Income protection £1,150 per month: £10

OH:
Life with critical illness cover of £50,000 with £25,000 cover for children £25
Life term life cover £300,000; £15

We also have a buildings, contents, home emergency and legal cover package totalling £34

According to Google, 30% of people don't have any life cover so I wonder if having this much in my current 5financial situation is wise. I'm looking to understand what others have and to get an opinion on this.

Statistics aren't always very helpful in these situations and I'm surprised its only 30% given you've the elderly who no longer have dependent children and have pensions with spousal benefits, you've many in rental properties who can't afford insurance etc. 

Its really a case of sitting down and working out what happens if one of you dies or if one of you become too ill to work ever again how do your finances then work? Remember that CI only pays out for certain illnesses so you can be too ill to work but not receive a payout. 

For us I bring in more than 90% of our income so there is little benefit in insurance for the wife. I am not a fan of CI and dont think the policies age well but have a significant PHI policy for income protection and sufficient life cover to pay off the mortgage and cover a notable number of years of lost income esp if she decides to leave the UK as she probably would. 

If we had more even incomes we may have a very different setup. 

You are presumably operating your own company given the relevant life, guessing the OH is an employee? Your company or elsewhere?

SK226956 said:

I have never taken out a life insurance, income protection policy. I don't consider it value for money at all. There are state benefits (along with few other) to fall back on should the worst happen.

You think state benefits equate to a £78k income???

kingstreet

What's the need for the OH £300k lump sum? Could that need be better satisfied using Family Income Benefit where the benefit is less like a lottery win and more like a monthly income?

chrisw

It's the same as all insurance - a waste of money until you need it. My wife had to stop work at age 45 on health grounds and the critical illness paid off our mortgage. Fortunately it was can't continue with 'own' job rather than 'any' job.

vacheron

My employer will pay 4x salary for death in service which I consider sufficient for my needs for now. But others have sworn by their income protection insurance and found it to be a lifesaver.

Savings, partners health, salary, and your total mortgage debt also affects things hugely.

I have personally always preferred to self insure by investing the £1300pa which I would have paid in your position and using that as a buffer if needed, however I have had stable employment for almost 30 years and no serious health issues so far... touch wood! 

It's a lot like backing up your PC and other digital devices. Nobody ever really considers it until they experience (or witness someone else experience) a disaster or a temporary scare, and then they seriously review their plans.

My concern, if the policies have been running for some time, would be how much it would cost to restart a new policy with the same cover if you cancelled and then changed your mind a few months or years down the line? 

If your OH's insuer will give £300,000 of cover for £324 per year, they must be considering the odds of having to pay out in on it in any given year being statistically less than 1000:1, but that it little recourse if you are the ":1"