Income protection & Life Insurance (and mountain biking)
Discussion
We are in the middle of sorting our life insurance, having fairly recently bought a family home, with the plan to have children in the next few years.
Current plan is to have
- Joint 'Life Insurance' (single death) to cover the full value of the mortgage. Decreasing, 34 year term. Really fairly cheap (1x) and pay off the house if the worst happens.
- Joint 'Critical Illness' cover to a value of just under half the value of the mortgage. The cover is significantly more expensive (6x the above), and you can fall into to a gap in what they cover, but if one of us is seriously ill should reduce the mortgage to something the other could afford alone.
- Individual income protection insurance to cover the bulk of take home pay, with one years deferment to keep costs reasonable (2x Life cover), which will pay out if unable to work but not covered by CI cover.
Does that appear broadly sensible to the assembled?
We both take home a reasonable professional wage, similar base salaries but partner gets some antisocial hours salary too.
My sick pay is full pay but discretionary, so long term likely to be stat-min only. Partner gets 6 months full 6 months half pay.
Income replacement cover for me has come back excluding mountain biking, which is a bit annoying, but by all account a lot of other providers would do the same.
Daniel
Current plan is to have
- Joint 'Life Insurance' (single death) to cover the full value of the mortgage. Decreasing, 34 year term. Really fairly cheap (1x) and pay off the house if the worst happens.
- Joint 'Critical Illness' cover to a value of just under half the value of the mortgage. The cover is significantly more expensive (6x the above), and you can fall into to a gap in what they cover, but if one of us is seriously ill should reduce the mortgage to something the other could afford alone.
- Individual income protection insurance to cover the bulk of take home pay, with one years deferment to keep costs reasonable (2x Life cover), which will pay out if unable to work but not covered by CI cover.
Does that appear broadly sensible to the assembled?
We both take home a reasonable professional wage, similar base salaries but partner gets some antisocial hours salary too.
My sick pay is full pay but discretionary, so long term likely to be stat-min only. Partner gets 6 months full 6 months half pay.
Income replacement cover for me has come back excluding mountain biking, which is a bit annoying, but by all account a lot of other providers would do the same.
Daniel
This is something I've never really looked into or bothered with.
I'd imagine that little lot will be costing you the thick end of £100 a month for both of you?
I've only got a small mortgage which will be shortly paid off. If I croak it then my work will pay out 120k to the Doris.
I guess this insurance is a complete waste of money until you actually need it- but if I'm right about it being £100 a month then that's quite a chunk of cash to most people every month
I'd imagine that little lot will be costing you the thick end of £100 a month for both of you?
I've only got a small mortgage which will be shortly paid off. If I croak it then my work will pay out 120k to the Doris.
I guess this insurance is a complete waste of money until you actually need it- but if I'm right about it being £100 a month then that's quite a chunk of cash to most people every month
princeperch said:
If I croak it then my work will pay out 120k to the Doris.
If you're talking about Death In Service cover, it'll only pay out if you die in service. An accident, sudden death, short fatal illness. Get cancer or similar, that drags on for a couple of years, and you'll have been let go long before you die, and she will get nothing. TwigtheWonderkid said:
If you're talking about Death In Service cover, it'll only pay out if you die in service. An accident, sudden death, short fatal illness. Get cancer or similar, that drags on for a couple of years, and you'll have been let go long before you die, and she will get nothing.
That's true. My employer normally lets you go on the sick for 12-18 months so it wouldn't be an instant loss of income situation. Maybe I should get some cover - but having read the op again I reckon the premium for them both is actually probably closer to 150 a month ...TwigtheWonderkid said:
If you're talking about Death In Service cover, it'll only pay out if you die in service. An accident, sudden death, short fatal illness. Get cancer or similar, that drags on for a couple of years, and you'll have been let go long before you die, and she will get nothing.
100% This.You would not believe the amount of my clients who refer to relying on employer provided DIS when discussing stand alone cover.
DIS is NOT a guaranteed payment. The payment is at the discretion of the trustees and the terms and conditions can change.
See;
https://www.dailymail.co.uk/news/article-3220821/F...
You also lose it when you change employer, which most people do every few years.
DIS should be a perk of employment, the icing on top of the cake that is your standalone cover.......not something your surviving family should be crossing their fingers pays out.....
cs174 said:
Contact Dale North at Pure Protect. He's a member on here, really helpful and knows his stuff.
Thanks for the recommendation.We have been speaking to a financial advisor my parents have used before and working with him, which is how we've got where we are, but obviously it's the sort of thing where you to an extent you get one chance at it and if it then doesn't do what you need it to you could end up a mess even having paid!
Perhaps look into getting individual policies for each of you, rather than joint names
That way, if one of you had a claim on critical illness for example, it would pay out and the policy would cease. The other could then continue with their existing CI policy without the need for fresh underwriting and likely higher premiums due to age increases/health changes, etc. Same principle with death cover.
Sad to say, but also if couples split up in the future, then you both have your own policies already without the need to cancel and obtain fresh cover.
That way, if one of you had a claim on critical illness for example, it would pay out and the policy would cease. The other could then continue with their existing CI policy without the need for fresh underwriting and likely higher premiums due to age increases/health changes, etc. Same principle with death cover.
Sad to say, but also if couples split up in the future, then you both have your own policies already without the need to cancel and obtain fresh cover.
Sarnie said:
100% This.
You would not believe the amount of my clients who refer to relying on employer provided DIS when discussing stand alone cover.
DIS is NOT a guaranteed payment. The payment is at the discretion of the trustees and the terms and conditions can change.
See;
https://www.dailymail.co.uk/news/article-3220821/F...
You also lose it when you change employer, which most people do every few years.
DIS should be a perk of employment, the icing on top of the cake that is your standalone cover.......not something your surviving family should be crossing their fingers pays out.....
This man speaks the truth.You would not believe the amount of my clients who refer to relying on employer provided DIS when discussing stand alone cover.
DIS is NOT a guaranteed payment. The payment is at the discretion of the trustees and the terms and conditions can change.
See;
https://www.dailymail.co.uk/news/article-3220821/F...
You also lose it when you change employer, which most people do every few years.
DIS should be a perk of employment, the icing on top of the cake that is your standalone cover.......not something your surviving family should be crossing their fingers pays out.....
In previous role, I had nine times salary death in service available, income protection until retirement age and £200k critical illness as part of salary package
In current job (after redundancy), I have three times salary, and income protection till retirement age
Quite a difference in cover...my wife should have bumped me off pre-redundancy
I left numbers out because in away it's irrelevant as it just all scales based on income and mortgage, but yes it is around £100 a month. Over the 30 odd years is 40k in round figures. However if it goes tits up it will pay out something like 20 times that.
We've worked out that the cover is sufficient but not excessive, such that in most perceivable situations it should allow us to keep the family home, which is project in itself and not a property that would sell in a hurry. Including an as yet theoretical situation, of having a child which needs significant or almost full time care. Which at the end of the day is what the cover is for! £100/month is loads in terms of beer money, but a fraction of what daily life costs, mortgage, bills, running a car, etc.
Finding work has always been easy but I have also changed job every couple of years for the last 6years, as a mechanical design engineer for a range of companies, with typically 6months probation and 1months notice, so that's not something that can be relied on for insurance. And several have not provided much in the way of sick pay etc anyway.
And as said, in terms of financial situation at very least, death is far from the worst case scenario. Being alive, but able to work costs, a lot more!
The way the policies are we have one Life+CI and one Life only, for similar amounts of cover, with the same provider (Aviva) because that's how they sell it if you want less CI cover than life, but also means we can I believe cancel one and retain the other at any point. Such as when our (proposed) children leave home. The income replacement is then a third and individual policy with LV insurance.
Point taken about couples splitting, and obviously you always think it won't happen to you, but certainly that's not the plan, and a joint single death policy obviously gives more cover for less premium by pooling the risk. And presumably the policy could continue if both parties continued to take part?
Daniel
We've worked out that the cover is sufficient but not excessive, such that in most perceivable situations it should allow us to keep the family home, which is project in itself and not a property that would sell in a hurry. Including an as yet theoretical situation, of having a child which needs significant or almost full time care. Which at the end of the day is what the cover is for! £100/month is loads in terms of beer money, but a fraction of what daily life costs, mortgage, bills, running a car, etc.
Finding work has always been easy but I have also changed job every couple of years for the last 6years, as a mechanical design engineer for a range of companies, with typically 6months probation and 1months notice, so that's not something that can be relied on for insurance. And several have not provided much in the way of sick pay etc anyway.
And as said, in terms of financial situation at very least, death is far from the worst case scenario. Being alive, but able to work costs, a lot more!
The way the policies are we have one Life+CI and one Life only, for similar amounts of cover, with the same provider (Aviva) because that's how they sell it if you want less CI cover than life, but also means we can I believe cancel one and retain the other at any point. Such as when our (proposed) children leave home. The income replacement is then a third and individual policy with LV insurance.
Point taken about couples splitting, and obviously you always think it won't happen to you, but certainly that's not the plan, and a joint single death policy obviously gives more cover for less premium by pooling the risk. And presumably the policy could continue if both parties continued to take part?
Daniel
Edited by dhutch on Tuesday 28th January 21:58
Edited by dhutch on Monday 7th March 12:23
princeperch said:
Well whether it was or wasn't, 100/150 a month is still quite a bit of money to a lot of people. I actually don't know anyone in my group of friends that has all the critical illness etc cover as the op has outlined.
It's all about attitude to risk.I have HNW clients who think they are not going to die or get ill at all, within their mortgage term.
I have clients on lower incomes with a full bredth of cover similar to the OP because for them, even one month of lost income and they are immediately in trouble.
There is no right or wrong answer, it's about protecting whats important to you (or not) and what you are prepared (or not) to pay for that peace of mind.
dalenorth said:
Thanks for the recommendations on here and yes happy to help if we can. It’s always worth getting a second opinion even if it confirms the advice is correct.
Thank you very much for the offer. I will be in touch. Sarnie said:
It's all about attitude to risk.
Exactly. Obviously £100 a month is a very real amount of money, however it's also split between two people for £50 each, the cost of a tank of fuel, around 10% of our mortgage payment, and only a few percent of our income. Which as percentages is far more manageable sounding. Obviously the cover required may not be liner but to an extent will scale with lifestyle. Obviously some take the attitude that it will never happen to them, and presumably would significantly change their way of life if it did. However our hope is that we have enough cover that should the worse happen, long term illness, or unable to work, we can largely continue as before. Keep the family home, etc. Various life decisions have been made inline with this and it's our plan. For me you have to have atleast some plan.
Daniel
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