Life insurance

[PinkMoscatoLover]

I’m sure this type of thread has been done to death on here but it was inspired by some of the comments on my current thread.

I’m 24 years old and have two toddlers. I don’t have a mortgage (and never will unless I win the lottery!) I have asthma so don’t smoke and hopefully never will. No serious health conditions either.

I’ve looked into health insurance and there’s quite a few different options and I find it rather confusing. How do you know the amount you’d like to take out? I’d have no mortgage to finish off paying once I pass away so the money would just be for the funeral and to support my kids.

If you have cover for 20 years, does that mean you payout will be spread over the course of 20 years or is 20 years the length of time that you’ll pay for? I couldn’t find the answers to my question so I thought I’d come here! I’d like to take out life insurance by the end of the year so that I can put it in the back of my mind. Thank you:)

Another question which I know is a silly one! If I paid for life insurance for only a handful of years and I randomly got hit by a car and died. Would the insurance company only pay out what I’ve paid so far? Or would they actually pay the full amount eg £100K?

I don’t get it!

Not silly at all and well done for thinking of your children's future. I've only ever had the one to cover the mortgage (it paid out in full before the end) but I always go to Money Saving Expert for financial advice. Try: https://www.moneysavingexpert.com/health-insurance/

Thank you so much @Willowkins the link you provided is so detailed and explains things in a simple way😆

Do you work and pay into a pension? If you do you may already have life assurance. Make sure you have completed the payee nomination form.
Have you written a Will? Give a copy to a trusted friend/family member. This can detail who you want to look after the DC and if money is to be held in Trust or used before they are 18.
Yes, if you were hit by a bus the full value would be paid out but there is generally a minimum time frame between taking out the policy and payment.

Many people assure their life until they are eg: 50 or 60 and the kids are adults so your 20 year term would cover this. If you died after 21 years, no payment would be made.

@JamMakingWannaBe I do pay into my pension but the total is only £30 a month so barely anything really. I just had a look. No life insurance with work the only thing I have is an expression of wish form set up which is in relation to my pension.

I don’t have a will, no. This is something I’m also interested in but don’t know how to go about it. Can I have a will when I literally don’t own a car, house or anything valuable. There wouldn’t really be much to state in it other than what would happen with the children.

As I’m only 24, say I took out life insurance for 20 years and that took me to age 44. It’d be more expensive to take out life insurance then because of my age. Can I just pay life insurance forever or is that unheard of? Ideally I’d like to have a valid life insurance claim when I die to the children are taken care of for a little while

You can take out "whole of life" insurance but that will be more expensive, and generally once children are grown and independent the purpose of life assurance is less pressing.
Life assurance at your age will be very cheap but you might want to consider other factors, critical illness insurance, income protection- i would recommend talking your situation through with a broker, taking into account your budget, your priorities, but be proud of yourself (sorry couldn't think of a non-patronising way to say it!) most people don't think of these things at all, unfortunately.
You don't have to own assets to have a will, a basic will is cheap and simple to arrange, everyone should have one.

I have a Letter of Wishes attached to my Will. It's not legally binding but it's something you could keep with your important paperwork to highlight who you would like DC to live with. I've also specified my coffin type, what I want to wear to be buried in etc but also listed holiday destinations I've enjoyed that I'd like DC to visit, my favourite recipes and songs, books, where I bought specific pieces of jewellery etc. When you are gone, they can have this to remember you by.

Hi OP. I am not an expert, but I would suggest thinking about a life and critical illness policy at your age and in your circumstances. It's a policy that would pay out the sum insured in the event of death or serious illness (usually specified in the policy).

In terms of how it works, generally, unless there's an initial exclusion period for some reason, the insurer would pay out the total sum regardless of how long you've been paying in. So if you insure yourself for £100k for example, over 20 years, for £10 per month, then you'll pay the £10 per month for the 20 years, but the sum paid out would be the £100k at any point over that period (barring any exclusions).

A financial adviser may be able to give some advice relevant to your circumstances.

Also, if you pay into a workplace pension, it's likely that there'll be some kind of death in service benefit, so that might be worth investigating more too.

If you are in a Union you may be able to get a will written for free.

If you decide to take out a policy to give your children an income for say 20 years if you die, or indeed a lump sum it may be worthwhile getting it written in trust so there is no inheritance tax payables it will be out of your estate.

I know you said you have no house etc so realistically you may not need to now but things may change.

You may also wish to investigate what income you would get if you were unable to work long term through ill health. Do you know what your job would pay out and for how long?

At your age sickness insurance should not be expensive. So you decide how much tax free income you need , after how many weeks illness you need it to kick in - say after 1 month, 3 months etc. ( dependant on how long your job would pay out sick pay ) and for how many years it is to run eg to age 60.

As it is paid tax free there is usually a maximum amount you can insure for ie about 60% of your current pay. Obviously the longer you can wait for it to kick in the cheaper it will be. You need to get advice as to amounts etc. either from your Union or an IFA ( Independent Financial Adviser.I

IME long term ill health is a major cause of poverty. Critical Illness is usually only for a specific list of serious illnesses so more restrictive.

You don't say what your job is but it is important that you have a policy which specifies ' unable to do your own job' ie the one you're doing when you fell ill. One that specifies only unable to do any job is easy for companies to wriggle out of.

Thank you guys! Lots of thoughtful comments and things to speak about. I’ll certainly be taking out life insurance asap and will look into getting a will:)

Popping late and hope you got all your answers. You mentioned insuring for 20 years, that usually means that once you stop you would need a new policy as it has an end date. E.g. if mine was until 2023, I am no longer insured - there is no pay out because I am alive. But there are other policies that would make a pay out for life, and often are enough to cover funeral costs not much else. Unless you can afford a big monthly commitment. But worth doing if affordable as they should pay out quickly when needed. Shop around for quotes and also for wills, should be less than £300 for a will - and you can review it regularly. A decent solicitor may do it for less - if simple.

equally if you start saving into an extra pension called a SIPP, that SIPP belong to you and you can add your children to receive it and take it as a lump sum and it isn’t taxed. I have many friends who wished they had done that, even a small regular payment adds up and you get tax relief at your income tax band on the amount invested.

Good luck.

I mean receive the money left in the SIPP on death. But you can take chunks out after age 57.

Edited away my post as I’ve just seen this is a super old thread 🤣