New mortgage - what life insurance did you get when you have pretty good employer benefits?

[Sandrine1982]

Hi,

We're thinking of getting a life insurance cover as we've just got a new mortgage but both DP and I have quite qood employer benefits, as follows:

Pension – Salary sacrifice, approx. 9% employee and 20% employer
Death in service – Lump sum 3 times annual salary
Sick pay - Full Pay for 12 months, Half Pay for 6 months

The mortgage is around 500K, term 20 years. We have one dependant, currently 2 years old.

I'm just not sure what cover we should get as I don't want to pay a lot of money for something we already have (e.g. death in service lump sum). However I'm worried about things like critical illness that would prevent us from working for the rest of our lives.

What sort of cover would you get in our situation?
I don't know much about insurance and it seems to be a minefield :p

Any advice much appreciated!
x

@maofteens

So I have had the worse case scenario here. I gave up work after second child and my husband was a high earner and we had a big mortgage (over £1m). He had life insurance through his work but it wouldn't have covered the mortgage, and to this day (he died 12 years ago) I do not understand, for a financially cautious and meticulous planner, why he never took additional life insurance to cover the mortgage. He died suddenly at 51, he had an ex wife and older kids and ours were just 4 and 6 years old. I received 75% of his work policy (the rest went to ex wife and grown up kids) and had to sell the house immediately to pay off the mortgage and downsize to one half the size in a cheaper area. Having substantial equity meant I could buy our next house outright which is his we've managed since then. Get the insurance. You never know what will happen.

I'm sorry for your loss, it must have come as a huge shock at the time. I'm glad to hear you were able to come out of the other side ok.

I know quite a few high earners similar to your DH. I work in finance, and for people who are used to seeing huge sums of money, it's easy to become quite cavalier about it all. I rationalise my life insurance by saying its the price of 10 coffees a month to secure my DCs future, yet my old boss who was on close to £600k a year viewed it as a complete waste of money, and was relying on the work policy, despite the fact that death is the one certainty we have in life!

We had an income protection policy when DC were small.
We wanted to know that if one of us died, the other would receive monthly income which would mean the remaining parent didn’t have to work or didn’t have to work very much at all but could be at hone with the children when they were small. The thought of being bereaved or having a severely disabled partner who required care, plus needing to work full time, wasn’t something we wanted to face.

Our policies were priced to last until children reached later teens. This made them cheaper. We figured that by the time our kids were later teens, they wouldn’t need a parent at home all the time if a parent died. The other could still work, plus mortgage would have been paid off.

Sometimes, part of these policies is considering what you need and when. Your financial needs vary according to stage in life and age of kids, mortgage debt etc. You can also choose to have policies which kick-in after your work policies pay-out - and this can make them more affordable. So really, you need someone to help you tailor your polices to what you need and ensure you’re not paying for cover your family circumstance or work circumstance doesn’t recover.

And yes, write a will if you haven’t. Really important. Loads of people seem to have organised financial cover but no will…why is that?

Thanks Wombat

I think I'm going to have to find myself a financial advisor.
Our previous one retired (which I suppose proves he was knowledgeable in that he was able to retire young )

Very interesting points all around

We had term life insurance at your stage, took out for 25 years so kids will be working long before it finishes. In fact we split up but kept the joint policy to help the other out if a parent died