Life Insurance - I know nothing!

[Flamesparrow]

My friend's husband died suddenly over the weekend, and it has given me that kick to realise I have absolutely nothing set up to take care of my babies if anything happened to me. I have no clue how to go about it though. How do I find out the best place to go, rates, how much does it even cost a month for an average person??

Why don't they teach things like this in school?

Sorry for the amount of probably really stupid questions I am likely to ask :o

Sorry to hear about your friend's husband - a horrid shock.

Re life insurance - there was a thread very recently on this - might even still be on the first page. Have a look at that as there were a few good tips on it.

First stop - find out what your employer (or DH's employer) will pay out on death, and then work out how much you might need to replace income of each partner (or childcare if one of you isn't working).

you also need to sort out guardians if (horrible thought) you and your partner were both killed.

mirror wills are part of this, and are not expensive.

moneysavingexpert is as good a place to start as any for life insurance.

DH and I got our wills done by a solicitor : £175 for the pair including who will look after the kids and winding down our businesses

We bought life insurance online through moneysupermarket. Separate policies, 20 year term, £200,000 each cost us around £25 a month each. so £400k to the kids if we both went.

Moneysavingexpert website is your friend.

We've got ours with Beagle Street (BGL Group/Scottish Friendly partnership) - each for £200k, 30 year term, costing approx. £10.50 per month.

Check your/DH's employers. DH's employer, I believe, pays 4x his annual salary. My employer pays 4x my annual salary plus another 4x if I appoint people (to receive the money) on the form. Given all this, DH will be substantially better off should I meet an early end!!!

We will take out another life insurance once we buy a house, separately covering the entire mortgage.

Thank you. The guardians thing is going to be a bigger issue than had ever really occurred to me until now as I've been doing with that if something happens to me, they go to their dad, but if something happens to both of us, we have our respective partners (split 3 yrs back) who I assume neither of us will want raising our children, and my mum (their closest grandparent) isn't getting any younger...

I need to properly sit down with him and talk it through. Finally getting divorce sorted so we may as well sort this all out too

It's occurred to me that when I've died and he's taken over, who THEN raises them is his choice anyway as he'll know what they need best by that stage...

DH has a death in service benefit with his work pension.
I have a term assurance policy with a life insurance company.
We have written our wills and asked our best friends to be guardians for the DC.

Well if your children's dad WANTS to raise his children if something happens to you then that is likely to happen. You need to discuss this with your ex & new partner.

Wills, very important.

I'd go see a financial advisor about the rest of it- they're very regulated now know so you'll know exactly what you're paying for.

£150000 of benefit costs me just under £9 a month, a policy bought via a popular comparison site called moneysupermarket. That plus my employer's death in service benefit will see dh and ds with my current salary x 10, which should just about take ds to legal adulthood if I cark it now. There are term and whole life policies, mine is term (finishes when I retire I think) as Google's opinion of whole life is poor (I am emphatically not a lawyer).

There's also writing the life insurance into trust, which I haven't quite worked out, but I think means paying less tax on the insurance lump sum.

10 times is a good number!

If it is written under trust, that should generally mean no IHT to pay (IHT is not an issue if it gets paid to your spouse, but could potentially be an issue if paid to someone else - including a partner to whom you're not married, or kids if you both die - bear in mind IANAL or an IFA so check that point and any possible downsides of writing under trust).

So 10 times salary tax free is probably more like 15-20 years of gross salary replaced, depending on your tax position. As joanarmatrading says, probably enough to take DCs to adulthood particularly if there are other assets such as a house.

I agree - term not whole life. Problem with whole life is that it is relatively expensive because everyone dies at some point so the policy definitely pays out whereas term, in most cases, doesn't pay out (which is a good thing as that means you haven't died ). Whole life is basically more of a savings policy than protection - good for, say, funeral costs or to cover IHT on a very large estate but probably not what you want if you are trying to make sure your kids are provided for if you die while they are still kids.