Level Term Life Insurance Guide Discussion

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  • dunstonh
    dunstonh Posts: 116,380 Forumite
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    Would it be cheaper if we took out 55 years on level term assuming we will covered till we are 85 years old or for long periods like this should we rather take whole life insurance policies.Do people even take level term insurance for such long periods of time i.e 55 years ?

    What financial need do you have that requires 55 years of cover?
    Do people even take level term insurance for such long periods of time i.e 55 years ?
    Very few people will have a financial need for life assurance that long.
    And the only reason for taking it till we are 85 is so we have more chances of the policy paying out.

    Statistically, correct. However, statistically you are unlikely to be dead before 85. So, paying more each month for something you dont need just to slightly increase the odds of death occurring when you dont need the money seems a bit pointless.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • sue23
    sue23 Posts: 141 Forumite
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    Fortunately we don't have any financial need as such, as we have paid off our mortgage, but just thinking it would be nice to leave a lump sum for the children, if the worse happens
  • qbazdz
    qbazdz Posts: 140 Forumite
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    so.. we're about to take a level term life and separate critical illness policy to protect ourselves and our home and we had a recommendation to take only the policy to cover the length of the mortgage and than if we wish to later purchase new policy to cover a longer period of time as our circumstances change.

    Is that the usual approach?
    In our case life policy up to 65 vs 75 is only a couple of pounds more expensive pcm, while 65 vs 85 is almost double.
    Critical illness is at least 20 more expensive pcm for both of us when increasing the term from 65 to 75y. Adding another 10y is another 40pcm on top..

    Im struggling to understand that kind of approach where you'd only insure for what you need now and for the term you need, but obviously have no idea how the costs look like when you take a new policy later to extend the cover.
  • dunstonh
    dunstonh Posts: 116,380 Forumite
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    so.. we're about to take a level term life and separate critical illness policy to protect ourselves and our home and we had a recommendation to take only the policy to cover the length of the mortgage and than if we wish to later purchase new policy to cover a longer period of time as our circumstances change.

    Is that the usual approach?

    No. You cover the financial need. No more, no less.

    You should have a decreasing term assurance for the mortgage and a level term assurance or family income benefit for any family protection you want on top of that. The term of the policies would likely differ (as your family protection needs are unlikely to match your mortgage term - possible, but statistically unlikely)

    You would not normally take out cover beyond your needs either.

    You would not normally take out a level term assurance to cover a repayment mortgage. Complaints have been upheld on that basis with the FOS.
    In our case life policy up to 65 vs 75 is only a couple of pounds more expensive pcm, while 65 vs 85 is almost double.

    So, that would mean you would pay more each month covering an amount you dont need. Then in later life when most people have no financial need beyond retirement, you would be paying for something you dont need.
    Im struggling to understand that kind of approach where you'd only insure for what you need now and for the term you need, but obviously have no idea how the costs look like when you take a new policy later to extend the cover.

    If you have a later financial need then you buy for that need then. You dont know what your financial needs are going to be in future so the chance of you buying exactly what you need now are very remote. Plus, you are paying now every month if you do that. So, absolutely no point.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • kingstreet
    kingstreet Posts: 38,767 Forumite
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    Won't your need for lump-sum protection end when you retire? That's the usual end-date for cover to protect a non-working spouse.

    For most people, savings takes over the coverage for funeral expenses post-retirement.

    At that age, life cover for inheritance tax mitigation is about the only need I can imagine.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • qbazdz
    qbazdz Posts: 140 Forumite
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    Thanks guys.
    We both work, so my thinking was that the life cover for a bit longer than our mortgage will give either of us or our child(ren) ability to do whatever we want with the house if the mortgage doesn't get repaid if worse was to happen earlier or some sensible amount to move somewhere closer to the rest of the family and cover any funeral arrangements etc.

    This sounds like the usual/most obvious would be:
    - decreasing term life insurance to cover mortgage term and the house
    - critical illness for the same term as a level cover but for a smaller amount
    is that correct?

    Thanks!
  • familyguy321
    familyguy321 Posts: 208 Forumite
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    Need a bit of advice on cancelling my life insurance cover...

    I took out a Critical Illness with Life Cover policy with FriendsLife a couple of years ago when i bought my house. My premium is fixed at ~£20/month and the critical event benefit decreases as per my mortgage protection schedule.

    Now, I am currently contributing into my company pension scheme and it came to my attention that, as a member, I am entitled to benefits in the event of death of ill health. The amount paid out is based on my salary.

    The question is, what advantage is there of continuing with the FriendsLife policy?

    Thanks in advance.

    FG
  • HappyHarry
    HappyHarry Posts: 1,588 Forumite
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    familyguy321 wrote: »
    Need a bit of advice on cancelling my life insurance cover...

    I took out a Critical Illness with Life Cover policy with FriendsLife a couple of years ago when i bought my house. My premium is fixed at ~£20/month and the critical event benefit decreases as per my mortgage protection schedule.

    Now, I am currently contributing into my company pension scheme and it came to my attention that, as a member, I am entitled to benefits in the event of death of ill health. The amount paid out is based on my salary.

    The question is, what advantage is there of continuing with the FriendsLife policy?

    Thanks in advance.

    FG

    Advantages of keeping it are:
    (i) If you die, your employer's plan and the Friends Life plan both pay out.
    (ii) If you suffer a critical illness, the Friends Life plan pays out.
    (iii) If you move jobs in a few years' time, you will be able to keep the cheap Friends Life plan you have in place.

    Disadvantages are:
    (i) It costs £20 per month
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • kingstreet
    kingstreet Posts: 38,767 Forumite
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    familyguy - do you have anyone financially dependent on you?
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • familyguy321
    familyguy321 Posts: 208 Forumite
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    HappyHarry wrote: »
    Advantages of keeping it are:
    (i) If you die, your employer's plan and the Friends Life plan both pay out.
    (ii) If you suffer a critical illness, the Friends Life plan pays out.
    (iii) If you move jobs in a few years' time, you will be able to keep the cheap Friends Life plan you have in place.

    Disadvantages are:
    (i) It costs £20 per month

    Thanks. Is £20/month cheap? What is the typical price for life insurance?

    FG
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