Life insurance / income protection choices

[Ironduke12]

Sorry to create another thread of this sort, but will keep this short as I've been doing my own research but just for general opinion of an approach I have in mind. I have existing insurance in place but the cover and term no longer meets my need and not getting very good value, monthly premiums nearing 100 per month.

I'm nearing 40 in the next month, have a 10 year old child though long time separated from mother (never married) . No health issues, average build/BMI (5,10, 75kg) had a recent blood test (all ok) cursory check for diabetes. Stopped smoking 10 years ago though used vapes until a year ago.

Spoken to a not quite independent FI, only sells certain products from certain providers but I get the advice/time for free for life. So, I have worked out and been offered 100k of life level pay-out (death and terminal illness until 71) and £1200 of income protection (full term until 69) for 42.50 monthly.

I have opted out from critical illness cover as I have two mortgage free houses, nothing extravagant, one worth 100k and the other 160k. My mother lives in the 160k house and I will move into that upon her death or need for care and I will sell the 100k house to fund my pension and a small proportion to my daughter for her eventual house deposit. If I'm unfortunate to need a lump sum for critical care I will use the 100k house to fund that and my pension and daughter will have to lump it - I'm sure she will still benefit from the other house and or a 100k pay-out if I croak before 71. I do still need to sort wills out, yes I know.

I'm conscious of monthly cost and try to get the best cover for what I can afford, given rising living costs. I earn more than average wage on a sole income but not in the higher tax bracket (will probably never will be) and I think I'm at peak earning now.

I think what I have planned covers me for multiple eventualities, do you think it is covered well? I know you cant cover for everything unless you are a millionaire. Insurance has been a little bit of a learning curve as for years I was paying out not knowing what I had been covered for.

[dalenorth]

If you have children I’d be considering Family income benefit as an income will go far further than 100k, I’d index link that too. The IP as you say is wise but you need to pick deferred periods and payout terms carefully to get it right, also depending on your occupation you would need a full choice of providers including the friendly societies. Make sure you use trusts and use an adviser rather than buy direct as you won’t get FOS protection if you make an application mistake.

This is our field and we help many Pistonheaders on a discount scheme, so feel free to drop me a pm if you’d like any help?

Edited by dalenorth on Friday 20th May 15:15

[Ironduke12]

Thank you Dale, you give me a bit of reading there. Had a quick look at family income insurance vs life and if there was several small children and a lengthy mortgage (and a partner!)I think it would be worthwhile but as there is one almost teen child and no mortgage I feel the lump sum of 100k would be adequate. Working it out its what I would have provided if I was alive in terms of child maintenance ( and bday/xmas gifts) from 10 to 19 at this point onwards should I die now. There will always be a second house left in a will that can be sold (most likely) or even moved into upon my death to prove some financial help into adulthood. I don't plan any further mortgages or major debt to be taken on by me and certainly no marriage.

Regarding the income protection, I have roughly 6-8 months of basic expenditure emergency fund (all bills and child maintenance +10%) saved separate in easy access, I also have a small amount of savings, 5 figures and only just! I have opted for 3 month deferral should I ever need to claim to keep the IP premiums reasonable. Any money saved from renewing polices top up the emergency fund.

A the above is in addition to if I ever need old age care but not even thinking about this now, which will eat into assets if ever needed - minefield.

Dale - thank for the offer of help, I think I've got enough brokers on the go but if I could ask one question, Between L&G and Aviva which company would you chose in terms of service and ease and dealing with paying out?

[Caddyshack]

Don’t forget that you cannot quickly and easily spend a house, especially if your mum lives in one. With a critical illness you often need fast cash if you want to opt for private or extra treatment. Even £30k critical can come in handy.

[Ironduke12]

Thanks Caddy Shack, point taken.

[dalenorth]

No worries at all. There is nothing between Aviva and L&G in honesty, so the cheapest is what I’d go for.

I really would rethink FIB as it’s cheaper and can also be paid as a lump sum.

Please please ensure whoever advises on the life insurance for you puts it into trust to avoid IHT and guarantee a speedy payment

[williaa68]

dalenorth said:

Please please ensure whoever advises on the life insurance for you puts it into trust to avoid IHT and guarantee a speedy payment

This is good advice. Also remember that life assurance is one of the few products still paying commission and commission levels are high. You can get a commission free quote for comparison from cavendish online