Life insurance advice

[ratbagcatbag]

Ok after reading on here how important this is and now having a twenty week old dd I know we need life insurance.

My DH is 49 and I'm 30, we have just over 100k on mortgage with 15 years left. I know we want decreasing term and I've done separate quotes for us.

The question is, do I need a broker or is my research enough? I'm worried a broker will charge us more than the quotes we are getting.

Life insurance is pretty simple as a concept. The tricky bit is knowing how much to get.

Firstly, do you or DH get anything through your jobs? Most employers provide some life cover - 3 or 4 times salary is common.

Then think about how much you would need to replace the income your DH provides and the cost of replacing the work you do as a parent (I'm assuming you are a SAHM and DH works).

Then what sort of life assurance do you need? Does it pay on the first death but not extra on the second? How long does it last for - until your child has grown up and left home? Until a possible second child has grown up and left home? Does it reduce over time - e.g. does it make sense to have more now when there are 18 years (say) when you have a dependent child and less in 15 years time when there are only three years left with a dependent child? How does it interact with a mortgage?

That's the tricky bit - working how much you need. I suspect it is generally quite a lot more than people assume. I have 7 times my salary as a lump sum, plus 25% of my income as an annual payment. We have enough cover on DW to provide for a nanny for a few years then a childminder and so on for the remainder of their childhood.

Hmmmm, we both work, I'm going back in five weeks :( work wise we both have excellent pensions and death in service benefits, but if DH died before me I'd have to ensure his ds was also taken care off which then wouldn't cover the remaining mortgage.

I think, looking at it, two separate policies which cover us until we aren't paying 1k mortgage is the best bet. Decreasing term suits us fine. Financially I could manage childcare and bills if there was no mortgage to pay quite comfortably, DH who earns similar would be the same.

Can't believe I've never thought about it until now. Doh!!

Worth bearing in mind, if you can afford it, to go for Level Term not Decreasing. Decreasing is v cheap, but you're actually paying for nothing if you die near the end of the term. Level is much more cost effective.

Also think about extras like Waiver of Premium (premium gets waived if you're off work on sick for more than 6 months) or Critical Illness Cover.

Nearly 7 years experience in Life Assurance

Moneysavingexpert has some useful information. We got ours through an online broker, Cavendish. If you know what you want and don't need advice they can save you lots of money Buying anywhere else the cheapest we could find for what we wanted was over £50 per month. Cavendish don't charge commission just an initial admin fee (I think that's how they work). We paid an initial fee of about £80 then the monthly premium is £25. After three months we were therefore saving £25 a month for exactly the same cover with exactly the same insurer.

Just a few things to think about. Firstly Death in Service benefit is not guaranteed. It is up to the trustee's to determine whether there is enough money in the pot at the time of claim as to whether they pay out. If you or your husband changes the company you work for you will no longer get the benefit and your premiums may be much higher if you decide to set up a policy then.

Also think about not only repaying the mortgage in full but your monthly outgoings until your youngest is 18.

For example.

I have Life Cover for £100,500 Level Term. Covers my mortgage

I have Life Cover for £16000 per year until my youngest is 18 (Family Income Benefit) which covers our outgoings

I have Critical Illness cover which pays 3 years of my salary to give me time to recover or die.

I am 35 with two children. This cover costs me £41 cpm.

Most brokers will charge nothing for writing your life cover. Please please please consider your circumstances.

What happens if you are off sick? Do you get full pay for a while, half pay for a while and then SSP? If so you should also be considering income protection if you are reliant on both incomes, or at least covering the wage earner whose income would be more missed.

You may think spending the money is abhorrent but I have clients who have called me and told me if I hadn't nagged them about it they wouldn't have taken it, and now they would have lost their home.

Please don't be one of those people.