How Much Life Insurance Do I Need?
We all have the list of admin things that needs to be arranged or investigated. And for many of us, particularly mums with children on that list is life insurance. It’s a scary thought to insure yourself for losing your life, but it is incredibly important to consider and to organise a policy. I wanted to share my life insurance experience and give you the facts you need to make a decision about your own life insurance.
Do I need Life Insurance?
If you have a mortgage and you have dependants, be that children and/or a partner then yes, you should consider life insurance.
On the event of death or diagnosis of a terminal illness the life insurance policy will pay out.
You don’t need life insurance if you have a large sum of money set aside maybe in investments or savings that will pay off any debt you may have. If you are renting with no dependants, you might decide that life insurance is not needed.
It also comes down to affordability too, can you afford to pay for an extra monthly amount based on your current budget.
How Much Life insurance do I need?
A company such as Lifesearch, who specialise in family life insurance cover, recommended to me that I have a policy to cover my outstanding mortgage. The amount of cover remains the same for the length of the policy, the length should also be the length of the mortgage term.
This will mean that the policy will cover any outstanding mortgage if the worst happens, meaning your dependants have one big thing that they don’t have to worry about, they keep the roof over their head and the mortgage is repaid in full.
Over time as the outstanding mortgage reduces will mean that your life insurance policy will be a larger amount than the outstanding mortgage. Or you can choose to reduce the amount of the policy over time.
How Do I Arrange Life Insurance?
There are lots of companies that offer life insurance, but it can be a mine field to work out which is best for you and how to get the beat deal so I will always recommend arranging a policy through a broker. Lifesearch is the broker I used just recently used to arrange my policy resulting from a re-mortgage.
Lifesearch are a friendly company who will have a short consultation with you over the phone to understand your financial situation and assess which insurance needs are suitable for you.
I spoke with Otis and shared details about my dependants, my job and my outstanding debts (mortgage). Otis also shared that because Mrs Mummypenny Ltd is a company I could pay for the life insurance policy through my business, thus saving 19% of the premium in tax savings.
Prompted by a Re-Mortgage
This whole life insurance conversation was triggered because I have recently re-mortgaged and increased the amount of borrowing I have. My existing life insurance policy has just five years left as it was taken out with my first ever mortgage application 20 years ago! This cover is not enough to cover my new current outstanding mortgage.
We also talked about my basic medical history, weight, height, etc. I also shared my blood disorder, ITP (a very long word is the actual disorder, but it basically means low platelets. Meaning I bleed for longer than regular people and bruise easily).
I also shared any recent operations within the past 3 years and medical history of parents and siblings. This is where I shared my parent’s deaths from heart disease aged 58 and 63, also my brother surviving a stroke at 55. This only becomes an issue with the cost and acceptance of life insurance if there are three or more close relatives with serious illness before the age of 60.
We ended the call and Otis went off to search for life insurance options.
Half an Hour Later
Otis called back shortly after with life insurance options and quotes. Legal and General were the recommended providers of the policy and we talked about what level of cover I wanted.
We looked at three options of cover, all on a level term basis, as recommended by Lifesearch. Meaning that the cover remains the same throughout the whole term of the policy and doesn’t reduce. That alternative would be known as a decreasing policy.
- £100k for 27 years was £12.67 per month*
- £200k for 27 years was £22.98 per month*
- £300k for 27 years was £31.51 per month*
I decided to opt for the £200k policy at £22.98 and will run it through my company saving me an additional £4.35 in tax. I already have a policy that covers me for £107k that runs until 2026. It is a tiny £6 a month, taken out when I was very young, so I am leaving that in place for the short term.
We also talked about placing the life insurance policies into trust, which simply means that the money is out of the estate upon death and the beneficiaries of the money receive it a lot quicker. Lifesearch will organise the placement into trust for free.
The next step was to organise a detailed health review call.
Detailed health review specific to my chosen Policy
My call was arranged for two days later and I spent around 20 minutes on the phone to a person from the Lifesearch health review team going over a series of detailed questions about my health specific to my Legal & General policy.
She listed every disease going and I had to confirm yes or no. There were questions about my clothing size, weight, height, alcohol consumption, if I have smoked, taken drugs. And I repeated the detail about my ITP and family disease.
This information all went to Legal & General and as Otis had expected they require a letter from my GP detailing more about my ITP blood disorder.
This often happens if you have anything remotely different or complex relating to your health. The insurance company requires a declaration from the doctor about severity, treatment and impacts on life.
And this is the point where we are at as I publish this article. I am awaiting a response from my GPs surgery before the application can be officially accepted. The delay is expected to be around 4-6 weeks. Lifesearch will keep checking the progress and will check in with the GP surgery to chase it along.
Lifesearch have been brilliant at explaining the process at every interval. From an introduction to the different products, to the level of cover needed and ascertaining the right policy for me. If sorting out life insurance is on your list drop them a line and see what they can organise for you and your family.
This is a collaborative post with Lifesearch.
Plus as per the * The prices quoted are circumstantial and depend on age, gender, lifestyle and various health considerations. Please talk to a LifeSearch adviser for a tailored quote.