Life insurance - what to look for?

[Chocwocdoodah]

Never had life insurance but now we're both in our late 30s with 2 kids, I think it's well overdue!

But I don't really know what/how much etc. We both have good jobs, though I'm freelance. Mortgage is about £240k. So how much cover do we need? And should we get critical illness?

Cover your liabilities (decreasing term/ level term assurance) and then the question is: what would I/partner need if I/partner was not here? Could you cover the cost of living/childcare? If there is a shortfall think about getting some family income benefit too e.g £1500 a month for a 20 year term.

Life covers relatively cheap. You're either dead, alive, lying. Simple. Critical illness is another matter. I tend to suggest that if you don't have a good financial buffer some sickness benefit - income protection, or CIC is worth considering. It's much more costly because it pays out more often and can be complex. Again consider the downside of being unable to work. I tend to suggest that people look at their living costs for 3-4 years and insure that for CIC and also add some income protection with a deferred period of 26 weeks. Freelancers are more vulnerable than the employed in this scenario. Don't go mad, but cover enough so you wouldn't lose your home (for example).

I think I'd see an IFA, you need to consider using a trust. Whether you are a sole trader or a company is also pertinent.

Thank you - good advice.

Another question - can I choose how much cover I have or are there limits? For example, I did an online comparison of policies and included in my cover, I chose an arbitrary figure of £10k per child per year til they're 18 and the policy was really cheap. So can I literally choose a figure - say £30k a year per child - as long as I can afford the policy?

A long time since I took out life cover but possible things to consider: companies may ask for more detailed medical history for bigger sums, possibly including a medical. Some policies pay out for a terminal diagnosis ie less than one year to live, not just on death.
Critical illness cover has had a bad press as companies have a narrow definition of critical illness and use small print to avoid paying out, may be better to get eg a mortgage protection policy.

All policies have terminal illness cover (12 months to live) - well all that I've come across (I'm an IFA). If you're terminal, you're gonna claim one way or another, no issue to them.

You will get more checks and investigations the bigger the sums BUT: you are responsible for declaring everything. Miss something off and you are committing insurance fraud. It will not pay out. If they accept you with no checks, that's your responsibility. If you have any dodgy medical history, Mum, dad siblings with illnesses under 60 (as one example), use an IFA. Insurance companies are different and the last thing you need is a decline on your record (you have to declare it every time). It may be we would get a pre underwriting authority so your record isn't marked.

If you ask for £20m cover they may want to know why. In theory you can insure yourself for anything, in reality companies would want to understand your circumstances (financial checks) and see its proportionate.

Please don't do income protection or CIC online. They vary so much that unless you know what you are looking at, you can get a shock when it won't payout or doubles in cost after 10 years (when you can't get insurance, but can't afford the new premium).

When you claim you can never have too much insurance, but you can certainly pay for too much along the way. It's a balance between those difficult choices.

Thank you - that's really useful. I think I'll do as you suggest and chat to an IFA.