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16/04/2013 at 14:14
I've just realised that the life insurance policies we have were taken out pre kids and before we moved house so there wouldn't even be enough paid out to clear the mortgage should anything happen to us.
I need to make sure there will be enough money for the kids to be brought up too but it's a minefield - no idea what we actually need!
Any tips? Is it worth going to see a financial adviser?
16/04/2013 at 14:38
I was a financial adviser. Obviously depends on budget but things I'd want to cover are enough to pay mortgage off. If your mortgage is interest only this needs to be level cover, if its repayment you can have it on a decreasing basis which means the amount of cover decreases in line with what's owed on the mortgage. Term should match mortgage term.
You also want to think about how much it would cost for someone else to look after the kids if something happened to you. So if you're a sahm you'd need full time childcare. If something happened to your h you'd probably want to cover his income for a minimum of until the kids are 18. You can take this as a regular income or lump sum.
I'd also strongly recommend critical illness cover. Everyone thinks about life cover but in reality you're far more likely to suffer a critical illness that might mean you can't work for years potentially so would need to pay bills, childcare and potentially adaptations to your house.
Lots to think about!
16/04/2013 at 14:56
Thanks WH, I filled out a quote online earlier and the guy just phoned back and was pretty helpful. He's saying if we take cover for 24 years (when our mortgage is paid off) and estimated 80k over and above what we need to pay the mortgage off. This obviously isn't anywhere near what my H would earn between now and the kids being 18 but I would have his pension too I presume? He said this can be put in trust for the kids but whoever becomes their guardian would get access to it. That's my main worry really, if my parents or brother were to have the children I want to make sure they have enough money for a big enough house to live in and bring them up
16/04/2013 at 21:34
Ally, not me, but my H is a life/pensions actuary, so some of it has sunk in over the last 10 years ;-) Plus we've recently sorted out our wills.
Do you/H have any death in service benefit from work?
I've just asked H re the pension, you will be entitled to his pension, but only the value of what he's paid in so far + interest, so it's unlikely to be a great deal. You could choose to have that as an annuity, but it may not be worth much.
We had/ve the same worry re BIL, or anyone, having to become guardians to our children and not having a big enough house for them and their children too. One thing we didn't realise until we did our will is that it's not possible to leave anything in your will to anyone other than your children whilst they are under the age of 21 (or similar, I can't remember exactly). There is a way around it which is to put one or more of your life policies in trust to your intended guardians. There is a risk that the person you name isn't the guardian, but you know your family better than I do.
I must admit 80k on top of mortgage, doesn't sound like a lot. Life insurance is relatively cheap, I'd be looking to up that if you can. To give some context, we're looking at approx 10 times our salaries if you include savings, investments and equity in house.
I also echo what WH says about critical illness. Harsh as it sounds, this is more expensive than death - loss of income, plus extra living expenses.
17/04/2013 at 09:01
Thanks BG, the guy I spoke to said the policy can go into trust so that whoever becomes guardian can access it. My H is a police officer so I presume he has a decent death in service benefit, will get him to double check what it is though.
We've upped the policy for just now anyway so at least theres some left after the mortgage is paid. The one we had before wouldn't even have covered that! If I've understood it right, if something happened to both of us, my parents could move in here with the kids and the mortgage would be cleared. They could sell their own house so would have that money plus they'd have the rest of our policy
17/04/2013 at 10:01
Are you getting a joint policy? Someone once pointed out to me that having two single policies was better than one, because if the absolute worst was to happen and two parents both died at the same time then the children would be paid out twice.
My single policy costs less than 50% of what it cost to have a joint one.
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