Life Insurance recommendations

[NiceCupOfTea]

I need some help with this as I'm not sure where to start.

Male, 41, self employed. Wife similar age but employed f/t, recovering from cancer so can't get insurance, 3 year old daughter. Some savings, no pensions, mortgage free.

Currently have mortgage life insurance which is a total waste of money as we have paid off our mortgage. I think we want a "level term" policy rather than a "decreasing" one.

Obviously the trade off, as with all of these things, is whether I pay a massive premium to guarantee my current wage for an indefinite amount of time if something happens to me, or a smaller premium for a "useful" amount for a shorter time. The first would be way too expensive but I am interested in the sort of trade off others have made, and any recommended companies. Is there such a thing as a "broker" who will sniff out good deals?

Also interested in cover in case I am unable to work due to injury or illness, due to being self employed.

Thanks in advance.

[Sarnie]

NiceCupOfTea said:

I need some help with this as I'm not sure where to start.

Male, 41, self employed. Wife similar age but employed f/t, recovering from cancer so can't get insurance, 3 year old daughter. Some savings, no pensions, mortgage free.

Currently have mortgage life insurance which is a total waste of money as we have paid off our mortgage. I think we want a "level term" policy rather than a "decreasing" one.

Obviously the trade off, as with all of these things, is whether I pay a massive premium to guarantee my current wage for an indefinite amount of time if something happens to me, or a smaller premium for a "useful" amount for a shorter time. The first would be way too expensive but I am interested in the sort of trade off others have made, and any recommended companies. Is there such a thing as a "broker" who will sniff out good deals?

Also interested in cover in case I am unable to work due to injury or illness, due to being self employed.

Thanks in advance.

I'm a Broker for Mortgages & Protection if you want to have a chat?

[dalenorth]

I'd advise looking at a family income benefit plan to run until your child reaches 21 to replace your wage into the household should you pass away, then add an income protection policy to pay you an income if you were unable to work due to accident or illness and that should cover most bases.

[rsbmw]

Slight thread hijack - genuine question, if a policy for say £400k (as a 32 year old) for 10 years costs £15pcm, but the same value for 30 years costs £60pcm, what's the benefit of going for the longer term instead of the 10 year policy and then getting another policy when that is reaching expiry? I'm sure at 42 the premiums will have gone up, but by enough to offset the £5k extra you will have paid over the previous decade? I'm sure I'm missing something.

[Sarnie]

rsbmw said:

Slight thread hijack - genuine question, if a policy for say £400k (as a 32 year old) for 10 years costs £15pcm, but the same value for 30 years costs £60pcm, what's the benefit of going for the longer term instead of the 10 year policy and then getting another policy when that is reaching expiry? I'm sure at 42 the premiums will have gone up, but by enough to offset the £5k extra you will have paid over the previous decade? I'm sure I'm missing something.

The 30 year policy averages the premiums across 30 years........so if you did what you suggested, the last 10 year policy would probably be circa £120pm+ to even out the first 10 years at £15pm......

Also, as you go through life, health issues occur that may mean further premium loadings or may even prevent you from getting cover at all...........when you could have secured the 30 year cover back when you were young and healthy

[DillonL]

rsbmw said:

Slight thread hijack - genuine question, if a policy for say £400k (as a 32 year old) for 10 years costs £15pcm, but the same value for 30 years costs £60pcm, what's the benefit of going for the longer term instead of the 10 year policy and then getting another policy when that is reaching expiry? I'm sure at 42 the premiums will have gone up, but by enough to offset the £5k extra you will have paid over the previous decade? I'm sure I'm missing something.

Where did you get your quotes from, a calculator? If so, put in the same details but change the age to 42. Then try 52.

The short answer is that between 42-62, you are much more likely to die than you are between 32 and 42. By locking into a 30 year policy, you remove the need for underwriting in 10 years time, and therefore become a bigger risk from the insurer's point of view. If you get seriously il lat 42, you would struggle to find decent cover (if any at all). With the 30 year term, the insurer can't say no! They have to charge bigger premiums now to account for that future risk.

[rsbmw]

Surely though you need to disclose any Health issues to the insurer throughout the policy, and they will just increase the premium anyway?

[Jockman]

rsbmw said:

Surely though you need to disclose any Health issues to the insurer throughout the policy, and they will just increase the premium anyway?

For Life Insurance?

[rsbmw]

Yes, i'm guessing from your answer that you don't have to disclose anything after the policy is taken out?

[Sarnie]

rsbmw said:

Yes, i'm guessing from your answer that you don't have to disclose anything after the policy is taken out?

Correct, it's underwritten at the point of application, not throughout the policy or at the point of claim.

Hence, take as much cover as you may think you may need as early as possible, on a Level Term basis, whilst you are young, healthy and premiums are cheap.............life premiums only go one way as you get older....up!

[rsbmw]

What's the rule of thumb for term length? Until the kids are 18+? Anticipated mortgage free age? Retirement age?

[Jockman]

Sarnie said:

Correct, it's underwritten at the point of application, not throughout the policy or at the point of claim.

Hence, take as much cover as you may think you may need as early as possible, on a Level Term basis, whilst you are young, healthy and premiums are cheap.............life premiums only go one way as you get older....up!

I would strongly second this - it is sooo cheap - but I would add one caveat.

As life expectancy increases, do a sanity check every five years or so just in case rates have altered. One of my policies was cheaper.

I also stopped smoking 9 years ago so 1 year later I became a non-smoker so I rang my 2 Providers. One dropped the premium immediately and the other kept the premium the same but increased the cover from £250k to £400k IIRC.

Unless your diagnosis is terminal, Insurers do not need any medical contact with you.

[Sarnie]

rsbmw said:

What's the rule of thumb for term length? Until the kids are 18+? Anticipated mortgage free age? Retirement age?

No rule of thumb as such, what suits you, will be different for others......

[Jockman]

rsbmw said:

What's the rule of thumb for term length? Until the kids are 18+? Anticipated mortgage free age? Retirement age?

You can pick any term but mine are to 65 years.

Remember Mortgage Lenders are lending into your 70s now so be mindful of your borrowing profile going forward.