Life insurance! Never even thought about it before...

[Jonny_]

The subject of life insurance cropped up in conversation recently. It's not something I've ever considered, being generally healthy and having never yet thought of myself as remotely close to the age that I should be worrying about such things...

However. I'm not as young as I'd like to think (will be 37 very soon), I have a young daughter, and suspect I now probably should start to think about what happens to both her and my fiance if I somehow cark it.

Given that my knowledge/understanding of this is effectively zero plus the fruits of 20 mins' Googling, I'm at that happy "found more questions than answers" stage...

• What should I be looking out for? Any common pitfalls that companies use to wriggle out of paying out?

• Is there a general formula for how much cover you need, beyond paying off any outstanding mortgage (none at present, potentially starting a new mortgage to move house in the next few years)?

• Putting a policy "in trust" evidently keeps any payout out of HMRC's grubby hands (A Good Thing). What's the downside?

• Is it more economical overall to take out a long term policy from the outset, or to set up a shorter term policy every few years?

• Am I better off taking out a straightforward "lump sum" policy and a separate "decreasing mortgage" policy if/when we take out a new mortgage to buy a bigger house?

• Beyond writing a will is there anything else to arrange such that the money goes to my fiance and our daughter?

• Any recommendations for a decent broker, or do the usual comparison sites generally suffice?

I realise this is a lot of "dumb newbie" questions, but any advice would be appreciated.

Cheers!

[tighnamara]

Jonny_ said:

The subject of life insurance cropped up in conversation recently. It's not something I've ever considered, being generally healthy and having never yet thought of myself as remotely close to the age that I should be worrying about such things...

However. I'm not as young as I'd like to think (will be 37 very soon), I have a young daughter, and suspect I now probably should start to think about what happens to both her and my fiance if I somehow cark it.

Given that my knowledge/understanding of this is effectively zero plus the fruits of 20 mins' Googling, I'm at that happy "found more questions than answers" stage...

• What should I be looking out for? Any common pitfalls that companies use to wriggle out of paying out?

• Is there a general formula for how much cover you need, beyond paying off any outstanding mortgage (none at present, potentially starting a new mortgage to move house in the next few years)?

• Putting a policy "in trust" evidently keeps any payout out of HMRC's grubby hands (A Good Thing). What's the downside?

• Is it more economical overall to take out a long term policy from the outset, or to set up a shorter term policy every few years?

• Am I better off taking out a straightforward "lump sum" policy and a separate "decreasing mortgage" policy if/when we take out a new mortgage to buy a bigger house?

• Beyond writing a will is there anything else to arrange such that the money goes to my fiance and our daughter?

• Any recommendations for a decent broker, or do the usual comparison sites generally suffice?

I realise this is a lot of "dumb newbie" questions, but any advice would be appreciated.

Cheers!

In no way an expert and others will be along to advise, one thing to do would be check if you have any life insurance as part of your current employers benefits / pensions.
I have known of a few people who have taken out life insurance who were unaware they had a decent life insurance with their employer. Granted this can change if you lose / change your job but worth checking.

[anonymous-user]

Jonny_ said:

I realise this is a lot of "dumb newbie" questions, but any advice would be appreciated.

The key point is this - with modern medicine a lot more people end up with "life changing injuries" than end up "dead".

Make sure you explore critical illness insurance and accident insurance at the same time.

It would be rather annoying to pay for excellent life cover and then end up "nearly dead, but not quite"...

[Sarnie]

Jonny_ said:

The subject of life insurance cropped up in conversation recently. It's not something I've ever considered, being generally healthy and having never yet thought of myself as remotely close to the age that I should be worrying about such things...

However. I'm not as young as I'd like to think (will be 37 very soon), I have a young daughter, and suspect I now probably should start to think about what happens to both her and my fiance if I somehow cark it.

Given that my knowledge/understanding of this is effectively zero plus the fruits of 20 mins' Googling, I'm at that happy "found more questions than answers" stage...

• What should I be looking out for? Any common pitfalls that companies use to wriggle out of paying out?

• Is there a general formula for how much cover you need, beyond paying off any outstanding mortgage (none at present, potentially starting a new mortgage to move house in the next few years)?

• Putting a policy "in trust" evidently keeps any payout out of HMRC's grubby hands (A Good Thing). What's the downside?

• Is it more economical overall to take out a long term policy from the outset, or to set up a shorter term policy every few years?

• Am I better off taking out a straightforward "lump sum" policy and a separate "decreasing mortgage" policy if/when we take out a new mortgage to buy a bigger house?

• Beyond writing a will is there anything else to arrange such that the money goes to my fiance and our daughter?

• Any recommendations for a decent broker, or do the usual comparison sites generally suffice?

I realise this is a lot of "dumb newbie" questions, but any advice would be appreciated.

Cheers!

You really need professional advice on these points.........a comparison site can't answer any of your question or give you the advice you need......

[Simpo Two]

Jonny_ said:

*Putting a policy "in trust" evidently keeps any payout out of HMRC's grubby hands (A Good Thing). What's the downside?

The latest I hear is that if a Trust looks like it's been set up to avoid tax, then it can be taxed.

[ellroy]

Jonny_ said:

The subject of life insurance cropped up in conversation recently. It's not something I've ever considered, being generally healthy and having never yet thought of myself as remotely close to the age that I should be worrying about such things...

However. I'm not as young as I'd like to think (will be 37 very soon), I have a young daughter, and suspect I now probably should start to think about what happens to both her and my fiance if I somehow cark it.

Given that my knowledge/understanding of this is effectively zero plus the fruits of 20 mins' Googling, I'm at that happy "found more questions than answers" stage...

• What should I be looking out for? Any common pitfalls that companies use to wriggle out of paying out?

• Is there a general formula for how much cover you need, beyond paying off any outstanding mortgage (none at present, potentially starting a new mortgage to move house in the next few years)?

• Putting a policy "in trust" evidently keeps any payout out of HMRC's grubby hands (A Good Thing). What's the downside?

• Is it more economical overall to take out a long term policy from the outset, or to set up a shorter term policy every few years?

• Am I better off taking out a straightforward "lump sum" policy and a separate "decreasing mortgage" policy if/when we take out a new mortgage to buy a bigger house?

• Beyond writing a will is there anything else to arrange such that the money goes to my fiance and our daughter?

• Any recommendations for a decent broker, or do the usual comparison sites generally suffice?

I realise this is a lot of "dumb newbie" questions, but any advice would be appreciated.

Cheers!

Payouts run to over 90%+ largely the only reason not to pay is if you’ve been economical with the truth.

Debt, plus some money for your family to replace your input to the family is decent start for cover needed, don’t forget some get cover from work.

Little downside to putting a trust round the policy proceeds, it only comes into play if you’re not here. Little bit of short term admin up front.

Longer term policy will cost more per month initially, but shorter term will need to be replaced when you’re older and guess what...? They’re more expensive due to your age & if you’ve had health issues maybe won’t get cover at all, or at much higher cost with exclusions.

Possibly, hard to be definitive.

Consider ‘Power of Attorney’ health and financial. Also review any pensions have them as potential named beneficiaries. If setting Trust for life cover write a ‘letter of wishes’ so trustees know your intentions.

Get a local IFA, family/friend recommendation or try Unbiased/Vouched For etc

Regards

Sorry should add if funds stretch look at Critical Illness & Income Protection as well. More costs, but much more likely to have these happen that just drop down dead!

Edited by ellroy on Tuesday 17th November 20:58

[Welshbeef]

Firstly get 2 single policies one for you one for your mrs instead of a joint policy.

Reason being if god forbid you were in an accident which caused both of you to die your children would have two payouts not one.

As for how much there are options
1. You can have it clear your mortgage balance either as a fixed lump sum for the life of the life insurance OR cheaper going for the reducing balance meaning it has a decreasing balance over its term.
2. You can have it clear mortgage and also leave a lump sum to wife and kids as if it ever happened the last thing you’d want is for them to worry about costs (either for her life or a year etc so she can find her feet)

Value could be to aim for 10x your annual salary or simply mortgage balance + £xk lump sum.

You can have multiple life insurances too.
Maybe a £6pcm to start that pays what £100k or go £20pcm that could be £250k

Then you have the whole critical care option too - which is a lot more again.


Best advice go onto Martin Lewis website he gives a lot of info on it in an idiots guide which is great for everyone to read and understand it. You can then make a choice find prices job done.

However as soon as you have a spouse or kids or anyone you want to care for it’s crazy not to have cover. Sure we all think we’re invincible and will live forever

[Sheepshanks]

Jonny_ said:

However. I'm not as young as I'd like to think (will be 37 very soon), I have a young daughter, and suspect I now probably should start to think about what happens to both her and my fiance if I somehow cark it.

Not clear from that who your daughter's mother/carer is, but you also need to think about provision if she becomes critically ill (so can't look after your daughter) or dies.

[dalenorth]

We specialise in this area and have a specific Ph deal if it’s of interest.

Cover is very complicated these days and there are pitfalls. Drop me a PM if you’d like to have a chat?

[Insurancejon]

^^^^^^this. I’m an insurance broker, and I still use dale to sort my life insurance

[TwigtheWonderkid]

ellroy said:

don’t forget some get cover from work.

No....do forget it. Never factor in a work death in service benefit when deciding on your life insurance requirements. Never..ever. It's a terrible idea.

Not many people of working age die and most of those that do will not be in service, because they'll have cancer or some other terrible illness and will have been let go from work long before they die.

Death in service is a nice bonus for your next of kin if you die in an accident, or of a heart attack or brain haemorrhage. But beyond that it's useless.

[dalenorth]

TwigtheWonderkid said:

ellroy said:

don’t forget some get cover from work.

No....do forget it. Never factor in a work death in service benefit when deciding on your life insurance requirements. Never..ever. It's a terrible idea.

Not many people of working age die and most of those that do will not be in service, because they'll have cancer or some other terrible illness and will have been let go from work long before they die.

Death in service is a nice bonus for your next of kin if you die in an accident, or of a heart attack or brain haemorrhage. But beyond that it's useless.

100% agree with you there

[Sarnie]

Agreed......so many clients seem happy to put their family's financial protection in the hands of their employer.........really bad idea;

https://www.dailymail.co.uk/news/article-3220821/F...

[Welshbeef]

And to think the starting point of some cover is a few pounds a month.
That’s a starting point you can always add - have zero or keep putting it off then sadly for some that “do it tomorrow doesn’t work out”

[TwigtheWonderkid]

Sarnie said:

Agreed......so many clients seem happy to put their family's financial protection in the hands of their employer.........really bad idea;

https://www.dailymail.co.uk/news/article-3220821/F...

Yup, she was a locum, so in reality no different to self employed. If you die whilst on a day off, you are between contracts, so there's no DIS to claim off. Because she wasn't in service.

[andrewh]

Sarnie said:

Agreed......so many clients seem happy to put their family's financial protection in the hands of their employer.........really bad idea;

https://www.dailymail.co.uk/news/article-3220821/F...

A single payout of £110k wouldn’t even begin to replace a doctors income for however many years, just seems like incredibly poor planning,

What’s a ball park annual figure for say a healthy 38 year old to give say a 10x average income amount upon death or terminal illness.

[dalenorth]

Quotes depend on so many factors but I’d say on average it’s around £100 pcm to fully protect a family on life only

[CaptainSlow]

dalenorth said:

TwigtheWonderkid said:

ellroy said:

don’t forget some get cover from work.

No....do forget it. Never factor in a work death in service benefit when deciding on your life insurance requirements. Never..ever. It's a terrible idea.

Not many people of working age die and most of those that do will not be in service, because they'll have cancer or some other terrible illness and will have been let go from work long before they die.

Death in service is a nice bonus for your next of kin if you die in an accident, or of a heart attack or brain haemorrhage. But beyond that it's useless.

100% agree with you there

Yup the reason DIS gets included in some employer pension schemes is because it is cheap, the reason it is cheap......

[WhiskyDisco]

A few years ago, when I started cycling into work on a regaular basis I got myself some additonal cover. I was obsessed with getting good value for money, so I didn't want to pay for advice. I used www.moneyminder.co.uk where I was able to get quotes, and then take out policies for a flat fee of just £25. They do offer advice too.

I ended up speaking to the guy who runs the site, and I remember him giving me some free tips, such as:

- taking out life cover in your partner's, but covering your your life - this way the cover is paid directly to your partner, and doesn't go into your estate (quick access, no IHT to pay)
- take out multiple policies - if you fee that you need to, you can cancel them one at a time, rather than one in a big lump
- choose a provider that covers lots of conditions for CI
- put your life assurance into a trust (keeps it out of estate - quick access, no IHT)
- use reducing value cover if you think that's appropriate, e.g. for mortgage
- use term cover (i.e. to age 70) rather than full life

[Welshbeef]

andrewh said:

Sarnie said:

Agreed......so many clients seem happy to put their family's financial protection in the hands of their employer.........really bad idea;

https://www.dailymail.co.uk/news/article-3220821/F...

A single payout of £110k wouldn’t even begin to replace a doctors income for however many years, just seems like incredibly poor planning,

What’s a ball park annual figure for say a healthy 38 year old to give say a 10x average income amount upon death or terminal illness.

Depends on 10x what £xk
Also depends on smoker or not.
Also BMI does come into it - they ask.
Also depends on any underlying conditions.

But say 40 and say pays out level for 25 years and say it’s £250k then your looking £22pcm (ish)