really confused about life insurance and mortgage protection

aimo

i'm currently paying £36 a month for my life insurance which covers the cost of the mortgage if me or my partner dies, this seems like quite a lot to me. have read martins article and am still confused about what cover i need? ,my mortgage is 112,000, and the article suggests getting cover for the highest earners wages over 10 yrs which would be around 275,000. i got some quotes using the companies he suggested but they don't ask many questions so i'm wondering how realistic their quotes are? help!!!!!!!!!!!!!!

dunstonh

i'm currently paying £36 a month for my life insurance which covers the cost of the mortgage if me or my partner dies, this seems like quite a lot to me.

On what basis have you decided that?

have read martins article and am still confused about what cover i need?

Martin isnt there to give financial advice and his article doesnt tell you what you need. Indeed, the only time he mentions figures is the really old sales rep figures of 10x earnings which is lazy and almost certainly likely to see you have more cover than needed (and therefore paying more than you need to). It is the lazy way to set a figure and totally unreliable. However, it is a safe figure which is why Martin probably uses it rather than try to teach you how to do a shortfall analysis which takes a bit more knowledge.

. i got some quotes using the companies he suggested but they don't ask many questions so i'm wondering how realistic their quotes are?

"global" illustrations from a quote portal assume good health, class 1 occupations (sometimes class 2) and that your height/weight ratio is normal.

lisyloo

and the article suggests getting cover for the highest earners wages over 10 yrs

As dunstonh says that's a huge generalisation.
I've heard this guideline for people with children, but if you have no kids and both of you work then it's a very different situation.

Check whether either of you have any benefits at work.
If not, consider what would happen should one of you die.
Do both of you work?
Would one of you be able to carry on paying the mortgage or do you need it paid off in full (having it paid off in part is an option).
Do you need other money to clear debts or for childcare?
Will you want to live in the same property anyway?

No-one can give you an exact figure because it depends on the answers above.

aimo

hi, we are both in good helath however i have a close relative who had cancer in their 40's so think that may put me as 'high rish'?! we have got kids and i get a death benefit of 26,000 from work. we both work. thanks

lisyloo

How old are your kids?
Don't need to know ages but you need to consider whether they would require full time child care if one of you died and then the survivor either has to give up working or pay for a child minder.
Then you have to consider how many years you need to pay for this for which would depend on their various ages.

You basically need to add up

a) Total paid child care required (or loss of income if survior gives up work)
b) Amount of mortgage that needs to be paid off for survivor to manage.
c) Anything else that needs paying off e.g. other debts.

Bear in mind also that if you die before retirement then any private pension funds you have may well pay out a lump sum and/or a pension to your survivor.
Depending on your age and how well you've funded your pensions this could worth considering.

There will be a figure which you definitely need for survival in the same house.
However you may well want to provide more than this so that the survivor is not scrimping to live.
That is purely down to your level of risk aversion and how much you can afford to pay in premiums.
In general most people would want their spouse to be comfortable rather than worrying about money all the time, however clearly this is a trade-off because if you go too high then you will have to pay higher premiums.