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Life insurance

22 replies

yondertwice · 29/01/2021 10:14

I'm going to be a stay at home mum and we feel it's a good time for husband to get life insurance as he is sole earner.
We have no idea where to start on this - can anyone advise?

OP posts:
Brutal1stBu1ld · 29/01/2021 13:25

Some companies offer free as part of their existing benefits or pension, suggest start there

ForensicAccountant · 29/01/2021 13:33

At the most basic level you would cover the amounts of debt you have, i.e. mortgage etc. Then you add on your monthly essential expenditure and work out a figure over a year. The easiest is to multiply that by the years you would have this spending. You can then look at more cover to cover your lifestyle spending as well.

yondertwice · 29/01/2021 13:35

Can anyone recommend any trustworthy insurance companies to investigate? And what is the average monthly cost we should be looking at?

OP posts:
DelurkingAJ · 29/01/2021 13:38

Can I suggest you also cover you? How will your DH do his job if he doesn’t have free childcare?

gassylady · 29/01/2021 13:41

Dont forget that if was your husband who was left alone with the kids it is likely he would need to alter his work pattern and possibly need paid for childcare. There should be life insurance for you too. Your joint financial planning should probably include a pension for you as well. Dont forget to register for child benefit in yiur name (even if your husband is a high earner) as that gives you NI contributions towards a state pension.

Svrider · 29/01/2021 13:52

Be very careful with your choice OP
We have been paying for life insurance for 10 years. It was supposed to pay a minimum of £85,000 . We have now been informed it only covers £32,000
Thank goodness we've not needed to use it Shock

titchy · 29/01/2021 13:58

Check his existing provision first. If he's employed and pays into a pension he almost certainly has some sort of life cover.

You should though insure your life as others have said.

fromdownwest · 29/01/2021 13:59

@Svrider - That sounds like decreasing term cover.
That is usually recommended to cover a repayment mortges
To cover a family you would be looking for level term cover or even Family income benefit insurance ( a form of level cover that pays out monthly)

The cost depends a lot upon your medical history, age, and term of policy required.

Okki · 29/01/2021 14:02

We have a joint life insurance policy that we took out 18 yrs ago. It's for about £100k (to cover mortgage) and we pay £10 a month. Originally taken through DirectLine. DH also has death in service benefit through pension policy at work. I have one just for myself for about £120k that I pay £12 a month for through Scottish Widows. I took it out in my twenties and it'll pay out up until I'm 80. Definitely make sure you're insured too. I'm always seeing adverts for Polly.co.uk.

Svrider · 29/01/2021 14:18

Thanks from downiest

I don't want to derail the thread, but wanted OP to know she needs to check with someone who understands insurance before committing to a policy

We were both utterly convinced the insurance was a minimum of £85,000
The documents said £85,000
But no, recently found out it only covers £32,000 (which you correctly says is decreasing, and is currently £60, 000 short of covering the mortgage 😡, never mind funeral expenses and other bills)

Svrider · 29/01/2021 14:18

From down west (auto correct fail)

user86386427 · 29/01/2021 14:23

You both need life cover, if you die, how will your DH manage to earn the same and then have childcare costs? He might want to outsource other elements like cleaning, you have financial worth too!!

MrsL2016 · 29/01/2021 14:23

We have decreasing life insurance to cover the mortgage. We update every time we remortgage. Our mortgage broker sorts it for us. We also have critical illness attached to that policy that pays out a lump sum in case of certain illnesses. We have used Zurich and Royal London before and had no issues. Pay about £25 a month.

maxelly · 29/01/2021 14:40

Hi OP, I'm no expert but this is a good article. There are a lot of different types of life insurance, some of the most common are:
-Death in service benefit linked to an occupational pension - usually in the form of a lump sum and a 'survivors pension' to be paid to the nominated beneficiaries. Your DH/DP may well have this through work already but a few things to bear in mind, he would need to be an active member of the scheme when he died for it to pay out, so for instance if he had a critical illness which meant he left or lost his job, it wouldn't pay out. Also, although the lump sum amount may sound large (4 or 5 times annual salary is not unusual), actually if you have a large mortgage, young children to bring up and limited earning capacity yourself it might not be enough, and the survivors pension can be quite small. Also on a basic level he needs to check he has nominated you as beneficiary, as you are married you should receive the money (unless he names someone else as beneficiary) but obviously it will be easier if you are named...

-Decreasing term critical illness and life insurance cover - you typically take this out at the time you take out a mortgage, and the idea is the policy pays off whatever is left on the mortgage at the time of death or very serious illness to prevent the house having to be sold (do check the T&Cs on this, I've heard of cases which you'd think would easily count as critical/very serious illness where the policy didn't pay out - they'll also usually health screen you/DH and exclude any illnesses where there's a family history - my mortgage company excluded all cancers, strokes, heart diseases and neurological conditions from mine due to crappy family history, which to me basically made the policy near worthless as the vast majority of likely causes of critical illness were excluded aside from accident or act of god [anger] ). Again see above, even if you do take this kind of policy out you may need additional cover as even if the mortgage was paid off, could either party raise the young children alone without additional financial support?

Lump sum cover, this pays out a fixed amount in the event of a death, do not get this muddled with the decreasing term cover. You'll need to think what a reasonable pay out amount would be as obviously the higher the amount the life is insured for the higher the premium. Also again being older or having a dodgy family history likely to mean higher premiums.

I'd highly recommend reading the article I linked to as it goes through a lot of what you need to know...

Sunseed · 29/01/2021 15:13

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Svrider · 29/01/2021 15:43

Indeed maxilly about the cover been next to useless
Also OP don't be fooled into thinking being regulated by the FCA protects you. It doesn't.

fromdownwest · 29/01/2021 16:08

@Svrider - FCA regualtion does provide an element of protection, as they advice has to be suitable.

If the OP bought a decreasing term policy for a level term mortgage on the internet, she would have no cover.

If she did the same and an FCA regulated IFA recommended that inappropriate protection, then she would have cause for complaint.

ForensicAccountant · 29/01/2021 16:42

If you were sold decreasing cover for an interest only mortgage you will have a valid complaint.
If you were sold decreasing cover for a repayment mortgage and didn’t make the repayments as originally set out in your mortgage illustrations, it will be much more difficult to challenge. There are some instances when interest rates went above a certain amount, your capital repayments would no longer align with your decreasing mortgage cover, again you have grounds for complaint depending on whether this was explained to you.

Sunseed · 29/01/2021 17:22

@Svrider I'd urge you to also check your documents to see if your policy is written into a trust or not.

I was helping a lady last year who only discovered after her DH died that his life insurance (taken out to cover outstanding mortgage) was not in trust when it should have been. The online brokers he used should have done so but failed to, even though they mentioned the mortgage and trusts in their paperwork and on their website. As a result, instead of the money easing her burden by being ring fenced for clearing the mortgage, it was paid into his estate whereupon it was completely swallowed up by his other debts. So instead of the peace of mind she should have had that her home was secure for the rest of her life, she now worries every month how to make ends meet.

123sunshine · 05/02/2021 12:55

Life cover is very important and there is sometimes a trade off between needs and affordability. I would recommend speaking to an independent adviser who can assess your needs and affordability and come up with a solution for you. Also does your husband had a death in service benefit in his current job? As a bare minimum life cover to repay mortgage and an amount to cover funeral costs. Family Income benefit as mentioned above can be an affordable way to provide life cover for families with children and certainly worthy of consideration, providing a tax free income for a set period of time to replace lost income or cover child care costs in t e event of one of you dying.

mootymoo · 05/02/2021 13:08

Get term cover payable on either life. I suggest you get it until your youngest is mid 20's ish so 25 years is perfect if you have a newborn (they should be self sufficient from then on). Compare the market is a good starting point. Mine is through aviva but as long as they are recognised by relevant industry bodies don't worry too much. The important thing is to be 100% truthful signing up with any preexisting conditions, even very minor because that is the main reason insurance doesn't pay, basically anything that requires medication or a procedure other than short term antibiotics.

ifadirect · 25/06/2021 14:39

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