Redundancy insurance/financial security for starting a family

[Friedbanana]

I’m just looking for a bit of advice regarding insurance.. we’re wanting to start a family in the next few years, we have a mortgage on a house big enough to stay in forever, no debts apart from that, and have overpaid quite a bit on it, and also have about £35k in cash savings (hoping to save another 20k over next couple of years) we drive a bit of a banger and the boiler will need replaced in a few years but apart from that I’m really happy with our financial situation, however DP is still sooo negative and does not want to start a family while we are not ‘financially secure’ (is anyone ever?!) he has been made redundant a couple times and it really has given him the fear. We also could never borrow money from either family if we ever were in a financial crisis as neither of our families would be in the position to lend any money at all. However I really think he’s being completely bonkers as we’re in such a fortunate position, and I’m also half self employed with my finger in lots of pies so I think I can pretty much guarantee I’ll be able to earn enough money to keep us afloat (except if I became ill but we do have insurance with our mortgage for that), however he very much feels the pressure is all on himself for some reason, even though I just earn a bit less than him. He said if he was guaranteed a job that pays about 2/3rds of what he’s currently on for the next 25 years he would be happy to start a family. I’ve tried to rationalise with him but it’s impossible and I do get where he’s coming from, I just think it’sa bit extreme. Anyway, I was thinking if we were able to take out some insurance that basically guarantees an income if he were to become redundant (he’s also worried about AI taking over his job as he’s a computer programmer) then that might help give him some peace of mind. Has anyone got this kind of thing? Thank you!!

I do know quite a few friends & family with redundancy protection / insurance - different industry, but same sort of logic as to the future (also an industry that is well-known for huge dips & highs). So yes, you could get that.

But it sounds like that he needs more than that, more than a simple insurance. This sounds a bit more deep-seated, because if you think about it logically having children is never a financially-sound decision. You have 2 salaries coming in today, paying for the lives of 2 people .... then at best in the future you still have 2 salaries paying for 3 / 4 / 5 people's lives; but quite likely to only have 1 salary or 1 and a bit for a good while. You'll never get enough insurance for that.

Just because others do it isn't a good enough reason to insist he's wrong - but you sound way more financially-secure than many. 2 salaries plus self-employed income options, decent savings and ability to add to that, modest expenditure (e.g. car), no other debt, no need to move house any time soon.

Essentially your cash savings already are that insurance. Redundancy insurance will only cover you for a couple of K per month, and usually only after a 3 month waiting period, and only pay out for a fixed maximum period (eg 1 year)..

Add up your essential outgoings, multiply by 12, or 18, or whatever will make him feel comfortable, as that’s the pot you need to “self insure” against redundancy. So e.g. if you need £2k per month and want to cover yourselves for 2 years then you need £48k.

I have redundancy protection of £2k per month that pays out for 12 months with a 2 month waiting period. It costs about £100 per month. I needed it when I took it out but now have sufficient savings again so am about to cancel it.

I work in this area (for John Charcol - I am not giving advice here, just my opinion).

We do not cover redundancy through any of our plans but I have looked into it recently for a friend of mine and the clause I came across the most for redundancy to pay out is it has to be involuntary redundancy. So if his company gave him the option of another job the other side of the country and he refused then he is technically making himself voluntarily redundant and the plan would not pay out.

Personally I have worked in financial services for 20+ years and have been made redundant multiple times. I have always landed myself another job, and in those 20+ years the longest I have been out of work is 6 weeks.