Income Protection/Life Insurance Questions

[Florence16]

Hi

We have moved house recently and changed jobs. I think I need to upscale our IP and maybe refine our LI.

How did you set your IP? Is it 100% of your salary, and do you have a set period it doesn't kick in for? I get about 6 months of six pay, and now I earn more I would currently get roughly 65% of my net pay via IP per month, I think I need to increase it, but not certain. Also not sure if the typical thing is to delay it for as long as you got sick pay, does it matter if there is a cross over etc, should you set it so it only starts after sick pay ends?

Also, life insurance. When does yours expire? Ours is set to expire five years post mortgage pay off, when I'd be 53. Do people normally have it running much longer than that? No DC currently. Mortgage is 260k and we each have £300k cover on individual policies.

Sorry for the trillions of questions, I don't know many people in real life who know their details or why they did it!

Hi Florence

In terms of income protection, mine is about 50% of current income and due to kick in after 26 weeks. This made sense in my old job where it was about 70% of income and after my sick pay ran out. I have now moved jobs and am going to increase it but, helpfully we’re about to increase our sick pay provision so I am waiting until I know for definite what that is going to be before I finalise it. My IFA has advised me not to cancel my current policy as I took it out a few years ago and I am unlikely to get such a favourable rate but to take out a second policy to top it up. So, when I know what the sick pay provision is I will then go for around 80% or current income through a second policy on the basis that it will be cheaper when I’m not commuting etc. My policy also enables me to work and will continue to pay while I am not able to do the work that I currently do so I can have a second income if possible. Does that make sense?

With life insurance mine is 2x mortgage and I didn’t think there was an end date but what do I know! That said I am a single mother by choice (in so far as son is donor conceived) and so I have to ensure that he is completely covered should anything happen to me so, as it stands he’ll get a mortgage free house, the other half of the life insurance and my life assurance from work plus my third share of any inheritance from my parents (can you tell I’m a bit paranoid...).

Not sure that actually helps!

That is really helpful, thank you very much! I can see why you have the life cover you do, if we have DC that sounds like a sensible move.

Our life and critical illness expire with mortgage which has begun to worry me as although the mortgage will be paid off (before then probably) we'll still have reasonably young children, 16 and 14, so will still have dependents should thd worst happen. Do we take out additional policies or discuss extending the one we have?

Life cover £400k each until age 90
Income protection £2k till age 65 set at 13 week delay (40% of my wage as I figure if I'm incapacitated I will only need to cover bills and not needlessly pay a higher premium for more cover).

£300k cover each with my IP 100% of my salary, starts paying in line with my sick pay (full pay for six months, 50% for six months). Allows me to do other work if possible but maintains my current salary.

We got full income protection so say I lose my arm tomorrow and can’t do my own job (own occupation cover) then I get £2k a month till 65 no matter what. None of this pay out for max 1-2 years business.