Is it better to get life insurance that lasts till age 65 or till death?

[Namechanger2015]

Hello,

I am sorting out my finances following divorce and am pretty clueless about finances in general.

I am a single mum to three children aged 10, 8 and 5 and as I am self employed (freelancer with steady work) I don’t really have any safety net regarding sickness, lack of work etc.

I am taking out life insurance at the moment - it’s for a big amount £1,230,000, and I will be paying approx £95/month which I am comfortable with.

I am 43 and the policy will expire when I reach 65. My children will be self sufficient by then, aged 32, 30 and 25.

But before I take the leap and sign the paperwork I wondered if it’s better to take a policy out until death? Or is it just an unnecessary expense?

I worry as we live in a London (born here, live v close to family and friends and unlikely to move) and so I would like the children to be comfortable for housing if I was to die when they are young. This policy would hopefully help towards that.

I am using a financial advisor as I really am quite clueless about these things and lack confidence with them. He suggested that life insurance policy should only be till age 65 and anything longer is not needed as the girls are independent.

However my dad regrets not getting a lifetime one. He is comfortably off but feels like it was money down the drain that he/we will never see again.

Any thoughts?

It’s really up to why you need it in the first place and what type it is. I’m assuming that it’s not decreasing term (ie the amount gets lower as you inch closer to 65).

Many people take out life insurance to cover any costs that their family would have to find money for if you died - mortgage, school / university fees / living expenses. As your kids are older it doesn’t seem that they would need it for that.

Also would it still be £95 if you did for longer? If you lived until 85 and paid another £95 a month would you have the £23k to pay for this in retirement (assuming you retired at 65). You may find it’s more money per month if you want it to run longer, but not sure.

Finally if you died after 65, what other assets do you have that would go into an inheritance. If none then it maybe tempting to keep it running for this, if not not so much.

I can see why the advisor has said only to 65, and without the facts (and I’m NOT an advisor myself) it’s hard to see what would be best. But the above are all points to consider further as to whether it’s right for you.

I hasten to add if you haven’t already, look into critical illness and get a policy that isn’t linked with the life - ie if it pays out in critical illness it will also pay out on your life. Sometimes it’s cheaper to have one that will only pay out once but it’s a false economy. This is especially important if you are self employed / freelancer. Also if you are the latter and you have your own ltd company and are a director you can get a ‘Relvant Life Plan’ life Insurance to cover you through that, that is an allowable company expense.

You only need it while you have dependents. I reckon you could knock four years off that.

Insurance is wasted money if the insured event doesn't happen. Doesn't mean you shouldn't take it!

We have a 20 year insurance policy that is linked to our mortgage. If we die before the 20 years then there is a large payout. After the 20 years, our kids will be grown up, house paid off so no need for a large payout but there whenever we die after that it will pay out £30k to cover burial costs etc.
You could look for something like that.

Thanks so much, this thread is great, it is really helping me to think things through.

If you lived until 85 and paid another £95 a month would you have the £23k to pay for this in retirement (assuming you retired at 65). You may find it’s more money per month if you want it to run longer, but not sure.

I never actually considered this. I have been left with no pension (10k) and no assets (although I hope to buy a house this year) and so I will struggle to pay this insurance when I do stop working.

The more I think about it the more I just need it to cover me till my youngest child is independent - they are currently aged 10, 8 and 5, so cover to age 65 makes sense to me now.

I hasten to add if you haven’t already, look into critical illness and get a policy that isn’t linked with the life - ie if it pays out in critical illness it will also pay out on your life. Sometimes it’s cheaper to have one that will only pay out once but it’s a false economy. This is especially important if you are self employed / freelancer.

I have been advised to get life + critical insurance, but it is so expensive. I have opted for one that gives me a lump sum of £100,000 but it will cost me £71/month, which is a lot. I have an embarrassingly silly question but what would critical illness cover for? I am getting income protection (for which I would get £3000/month, enough to cover bills and children costs each month, costing me £82/month)? Is the critical illness lump sum just for additional reassurance if I was ill? If so is £100,000 enough?

Also if you are the latter and you have your own ltd company and are a director you can get a ‘Relevant Life Plan’ life Insurance to cover you through that, that is an allowable company expense.

I am a limited company, the IFA has recommended my life insurance as a Relevant Life Plan and so this comes from my company expenses, thank you for reassuring me this is the right thing to do . But the critical illness and Income protection don't come from company expenses, and they will be costing me £153/month from my salary, which seems like a huge amount to me.

Thank you for talking to me about this and sharing your thoughts. I have not been very financially aware, and DH financial abuse has left me with zero confidence to make money decisions alone. I really appreciate being able to discuss this with someone.

You only need it while you have dependents. I reckon you could knock four years off that.

That's a good point, perhaps only needed till my youngest is 21 in that case - I will find out how much this costs. thanks!

Many children continue in full time education beyond 21 so up to when you're 65 seems sensible. You can always stop paying a couple of years earlier if you no longer need the cover.

Hi, the critical illness cover will cover a lump sum for certain illnesses but it does depend on what cover you get. (Life covers are the same across the board). Critical illness cover can help if you get cancer etc and are not able to work and provides a financial buffer. Is it enough? It’s hard to really tell - I guess it depends on what you would use it for, but lots of people would try to calculate it on a X years expenses basis. For immediate costs the income protection is a good idea however again is £3k cover really depends on what your minimum outgoings are and also take into consideration how long that cover would pay out for if you claimed. Playing around with this could slightly reduce the amount you pay out each month for the cover.

It’s hard to know if it’s ‘enough’ but it sounds like you are considering the right things when putting this into place.

If you are only wanting to keep covers until the yougest is financially dependent then I would suggest getting a quote for decreasing term critical illness and in theory you would need less money as the children get older. For the life, if you are doing an RLP then I don’t think the cost for this would be much different so I wouldn’t bother.

Premiums will be a lot (and I mean a LOT) more than £95 a month if you get a whole of life policy.

I think we've just taken it out until the kids are 18-21. After that, they should be capable of finding a job/selling our house and downsizing