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Life insurance advice

(11 Posts)
superking Mon 04-Jul-16 10:42:47

DH and I really need to sort out some life insurance. Our situation is not unusual but I'm finding it hard to work out what level of cover we need, so any advice would be welcome. I do plan to speak to a broker or two but would like to feel a bit better informed before doing so.

So... I am a SAHM to two preschool aged children. DH works full time, long hours, and is a high earner. His employer offers a death in service payout of 7x salary which would be more than enough for me to pay off the mortgage and live off for several years. Do we need to get life insurance for him as well? Tbh I am more worried about critical illness cover as if he had a long term illness which stopped him working for a long time things would be very difficult even if I went back to work full time.

If I died he would really need a full time, possibly live in, nanny to look after the children as his hours are long and unpredictable and he travels for several weeks a year. Of course in reality if I died he might have a huge rethink of his work commitments, but I think it's best to proceed on the basis that he would continue with the status quo. So I assume we would need to get enough cover to pay for a nanny or nanny/ housekeeper.

Am I approaching this the right way? What else do I need to take into account? Any advice welcome!

littlewoollypervert Mon 04-Jul-16 10:48:13

1) Mortgage probably covered separately (check this out) - your contract may have required you to put cover in place as a condition of the loan
2) He may change job - maybe don't factor in his Death in Service as it may not be in place forever
3) Simple (ish!) calc
- Total coming into the house each month
- Less any expenses that will cease on death (e.g. the mortgage repayment)
- Add back any expenses that will commence on death
- Add back any unpaid work that the person currently does, that would need to be paid for if they died
Total = amt of income needed for each month
Multiply by 12 and then by the no of years till your youngest child stops being financially dependant on you.
This gives the lump sum needed (do this calc for each of you).
Subtract any other existing cover (not the mortgage cover though as that's already factored in above)
This will give the net cover needed for each of you.

It will probably look huge but everyone vastly underestimates how much cover they need.

superking Mon 04-Jul-16 11:28:35

Thanks, that's really helpful. Any thoughts on critical illness cover? I have read that it is often very limited in what it actually covers and isn't worth it - is there any other way of insuring against loss of earnings through long term illness?

aginghippy Mon 04-Jul-16 12:07:43

Rather than critical illness cover, I have gone for income protection cover. It's not limited to a particular type of illness, but pays out if I am unable to work due to any illness or injury.

littlewoollypervert Tue 05-Jul-16 12:29:14

Critical illness cover is usually easier to get than income protection.

A combination of both tends to work best (CI cover pays out a lump sum for a serious illness - and it has to be serious , lifechanging even)

Income protection pays out if you are unable to work due to illness or injury for a certain period (there is a non payout period first, usually 8, 13, 26 or 52 weeks). The longer the non payout period chosen, the cheaper the cover.

Both, however, are fairly pricey. Your best bet would be to go to an independent insurance broker who can quote you the best rates out of different companies, and advise you on how to go about putting cover in place - amount of medical info needed etc.

poocatcherchampion Tue 05-Jul-16 12:36:56

We don't have any mortgage protection. O would argue it isn't standard. Something to check op

aginghippy Tue 05-Jul-16 13:26:12

littlewoollypervert is right about the non-payout period on income protection insurance. We chose to have 52 weeks before it pays out, as I would be getting sick pay from my employer up until that point (6 months on full pay and 6 months on half pay). If you find out what your DH's employer offer in terms of sick pay, it would help to decide about cover.

ExcelDebs Tue 05-Jul-16 14:43:03

Hi. I am a mortgage/insurance broker and for me and my family I have pondered long and hard about what might be the right protection to take out (I have found it much easier to be impartial and advise others!). Particularly as circumstances can change over the years. I have covered my DH for CI with a lump sum big enough to then have enough time to consider what happens next and make any necessary changes. I haven't got any cover for myself other than life cover (which imo everyone needs to a certain extent). I am probably going take out some Family Income Benefit. There are several different types of cover and its probably best to chat it over with an independent adviser.

namechangedtoday15 Wed 06-Jul-16 11:15:50

A couple of other points. Is your DH likely to move companies? Just something to bear in mind when you're factoring in how much cover to have.

I think you need some CI cover for you too - if you were ill, who would look after the children (maybe take them / collect them from school)? Potentially your H would have to cut back his hours / employ a nanny etc.

As for CI / income protection for him - that is definitely something you need to consider. We have a range of policies - when we first took out a mortgage, we both had life & critical illness policies for the term - but level cover (so it never goes down even though your mortgage goes down). That was 13 years ago now, so if either of us had a critical illness then we'd get a pretty big chunk which would probably cover income for a couple of years. Every time we've moved (and increased the mortgage), we've taken out additional life insurance to cover the additional mortgage, but without CI.

FWIW, you need to do it asap especially when you have children. Having had a H who was unable to work for about 4 months (due to pre-existing condition so wasn't covered on his CI policies), he received statutory sick pay which was about £65 a week, when I was on maternity leave with 2 babies / mortgage / bills etc (timing could not have been worse!), its frightening how even a short period of illness can impact on your finances.

superking Thu 07-Jul-16 11:48:56

Thank you everyone. Lots to think about. Think I will book an appointment with an independent adviser.

Runzilla Fri 08-Jul-16 23:28:17

Hi super king, I was a sahm when my oh had a very brief illness and died. I am very relieved we had critical illness insurance and would second the other poster saying insure for more than you imagine you would need. It can be hard getting back into the workplace and I can't imagine ever earning anything like the amount my dh did. Being widowed is fairly near the top of crap things that can happen to your family, so the bigger cushion, the better.

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