Mel B Posted December 20, 2011 Share Posted December 20, 2011 Whilst at work my hubby had life insurance included as part of his pension scheme for 'death in service', worth around 3 years' salary plus contributions back etc and a small annual widow's pension, however, when he left 2 years ago, as he was no longer 'in service' this reduced to around the equivalent of 5 months' salary (from what I can recall), plus a small annual widow's penson, and now he doesn't have any other life insurance. When I leave at the end of the year I will be in a similar situation with the 'death benefit' being reduced. We have a mortgage but if needs be could pay it off either from savings or by selling our rental property (although we are getting in 4 x what the mortgage payment is in clear rent at present so wouldn't have an actual 'need' to pay it off). I just wondered what other people do - do you take out your own life insurance, or not bother? Link to comment Share on other sites More sharing options...
Guest peter Posted December 20, 2011 Share Posted December 20, 2011 Don't bother. As we own our house outright and have not unsubstantial investments. If one of us dies the other one could if they wish, realise the investment income and sell the house to downsize. So see no need for insurance, for what benefits. Link to comment Share on other sites More sharing options...
flicka Posted December 20, 2011 Share Posted December 20, 2011 Hi Mel IIRC you do not have any direct dependants, so why would you require Life Insurance that only pays out on death & your £ input will generally be more that the benefit payable, unless you outlive a specified age when payments stops (I think 90) Most of your payments go towards system administration & inflation proofing. We have never & would never taken out any Life Insurance, although have had various Life Assurance schemes in the past. (2 totally different products) Like your hubby I was covered whilst working & now reduced cover through Company Pension. Simple solution If you want some cover for funeral costs, etc., invest it in an ISA, which you can switch if rates improve. At least you will retain your capital & inflation proof it to some extent. There are many other types of investment available at various rates of Risk / Return, for whichI decline to advise. IMO you would need to seek advise from an independant Financial Advisor. Link to comment Share on other sites More sharing options...
BGD Posted December 20, 2011 Share Posted December 20, 2011 Don't bother. If I'm dead, I ain't gonna be worrying at all............. Link to comment Share on other sites More sharing options...
Mel B Posted December 20, 2011 Author Share Posted December 20, 2011 You recall correctly flicka ... took me a while to remember what IIRC meant! :$ No dependents, other than the dogs and we've already got arrangements in place so they'd be taken care of if anything happened to both of us. We've had our own insurance in the past but only when it was required due to our having endowment mortgages, since then we've only had the ones via work. As the vast majority of our assets/money would go to charity anyway, I'm not worried about there being enough for a simple funeral (a simple biodegradable cardboard box would do for me ... I wouldn't be around to care anyway!) so trying to protect the dosh for passing on to family isn't a major issue for us. We have the rental bungalow, and our own bungalow, both of which we can sell (she says hopefully in the current depressed market *-) ) to realise funds if we so required whilst one of us was still around, but don't anticipate that there would ever be a need to do so. 'Retiring' at my age (not intending to 'rub anyone up the wrong way' by saying this) means I''ve been doing a fair bit of planning and calculating to ensure we've got enough dosh to see us well into the future, with savings maturing/being accessible etc each year to ensure we have money for that year's expenditure, as we won't have any form of regular income at all until hubby can start to draw his reduced work pension at 60, in just over 6 years' time, and me in just over 11 years' time. We can't 'bank' on the rental income, as the mortgage interest rate could be increased and/or we could lose our tenants. I just wondered how others deal with this and if I'd missed thinking about anything really. Link to comment Share on other sites More sharing options...
PJay Posted December 21, 2011 Share Posted December 21, 2011 As has already been said, don't bother.If one owns property , that is enough for any ones future. INO. We have family, but they all have there own houses, so are not destitute (Even one Grandd;aughter has just got on the property ladder at 22). Don't worry about the future, take each day as it comes. Enjoy your forthcoming retirement Mel We look forward to posts of your adventures on this forum Happy Xmas to all who read this, and a VERY GOOD 2012 PJay Link to comment Share on other sites More sharing options...
CliveH Posted December 21, 2011 Share Posted December 21, 2011 A quick scan of the posts tells me that you have been given the correct advice and that is that you do not seem to need any Life Cover. And Flicka touches on an interesting point - the difference between Insurance and Assurance. Insurance is where you protect yourself from something that may happen - so Car Insurance - because you may have as accident. As we are all going to die, protecting your family from this event is via Life Assurance. The gamble is when you are going to die. If you are aged 30 with a £100,000 mortgage that needs to be paid if you as the main breadwinner die, then the premiums will be cheap. If you are aged 75 and want £100,000 Life cover be paid in trust for IHT purposes, then because the probability of death is so much greater, the cost of life cover is equally greater. One other oddity of Life Assurance is the relative cost of Joint Life policies. Banks and Mortgage lenders just love Joint Life policies. A Joint Life policy to cover a mortgage will pay out just once on first death leaving the surviving spouse uninsured. The surprising thing is that two separate policies on each life cost the same as a Joint Life policy. So the banks tend to recommend them because the premiums are the same but the payout potential is half that of two separate policies. So, with two separate policies, if one dies the payout on first death is the same as for a joint life policy, BUT, the surviving spouse is still covered by their own policy. They can chose to continue or not, but sometimes life is cruel and the surviving spouse may be uninsurable, or be of an age when if life cover is needed the premiums are, by then, far more expensive. If both partners die in the same tragic accident, then both policies pay out, so it could be that for the same premium cost, the kids not only get the house paid off, but have a good capital sum to support them. Another advantage of having two single life policies is that with one in three marriages ending in divorce, if each has their own policy, then each can take that with them. A joint life policy presents all sorts of problems in divorce. Also - DO MAKE SURE YOU WRITE THE SUM ASSURED IN TRUST. Writing a Life policy in Trust makes sure that your loved ones get the money quickly without the sum assured becoming part of your estate and therefore potentially subject to IHT. Life offices provide Trust Documents at no cost, and advice on the type of trust that best suits your needs can be obtained from an IFA. Death in Service Benefits Mel mentions Death in Service benefits, and correctly describes them as a death benefit paid to your beneficiaries on your death by your employer. Not many people appreciate that this payout will form part of your estate and so again it can prove to be subject to IHT. So rather than simply writing your spouse as the beneficiary on the "Expression of Wish" form (i.e. who you want the payment to go to) you can set it up so that this death payment is paid into a Trust. This has several tax planning advantages for your beneficiaries who are of course beneficiaries under the Trust. This type of Financial Planning is a tad complex - so again specific advice should be obtained. Finally - You should also make sure you have a Will and that the wording is reviewed regularly. Link to comment Share on other sites More sharing options...
Dave225 Posted December 21, 2011 Share Posted December 21, 2011 Just one addendum to add to Clive's post, which may or may not ever be relevant to you. If you move from Scotland to England or vice versa then you are advised to make a new Will as the wording is different. Also if you have a lawyer whom you have dealt with for many years and again move over the border, he/she cannot act for you as they have no jurisdiction. The end result is the same but the methods are different. I know we are all one 'happy' United Kingdom but there are still differences. Link to comment Share on other sites More sharing options...
CliveH Posted December 22, 2011 Share Posted December 22, 2011 That is a good point Dave re Wills. All the Trust Wording we write states that the law of England and Wales applies. If I was writing something in Trust for someone in Scotland (never have and unlikely to do so) then the documentation would say that Scottish Law applies. In most cases the Law is similar and just some of the Terminology differs. But you do need to be aware of the two differing systems. http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm42700.htm "The treatment of trusts for tax purposes is the same throughout the United Kingdom. However, Scottish law on trusts and the terms used in relation to trusts in Scotland are different from the laws of England and Wales and Northern Ireland." Link to comment Share on other sites More sharing options...
Sparkle Posted December 22, 2011 Share Posted December 22, 2011 BGD - 2011-12-21 12:04 AM Don't bother. If I'm dead, I ain't gonna be worrying at all............. Errrrrhhhhh Hummmmmmmm!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I'll worry!!!! Link to comment Share on other sites More sharing options...
Sparkle Posted December 22, 2011 Share Posted December 22, 2011 Mel B - 2011-12-20 11:02 PM Whilst at work my hubby had life insurance included as part of his pension scheme for 'death in service', worth around 3 years' salary plus contributions back etc and a small annual widow's pension, however, when he left 2 years ago, as he was no longer 'in service' this reduced to around the equivalent of 5 months' salary (from what I can recall), plus a small annual widow's penson, and now he doesn't have any other life insurance. When I leave at the end of the year I will be in a similar situation with the 'death benefit' being reduced. We have a mortgage but if needs be could pay it off either from savings or by selling our rental property (although we are getting in 4 x what the mortgage payment is in clear rent at present so wouldn't have an actual 'need' to pay it off). I just wondered what other people do - do you take out your own life insurance, or not bother? Seriously... people have life cover for various reasons - if mortgaged/with debts then you can opt to cover the amount outstanding if you want to leave whoever (significant other etc ) you have left behind with a mortgage/debt free, or if you have no one to worry about and don't really care about leaving dosh (in whatever form, either cash or property) to someone then don't worry about it. There is always the option with property that it can be sold to pay off outstanding debts, providing there is enough equity in the property vs monies outstanding. Its usually more aimed at younger people who have families to look after and mortgages to pay, and it offers some financial security for the future if something should happen to one of them (sometimes with added or separate critical illness cover.) Link to comment Share on other sites More sharing options...
CliveH Posted December 22, 2011 Share Posted December 22, 2011 Please be careful with Critical Illness Cover (CIC) – the definitions of what is covered can be obtuse in the extreme such that some of the more unscrupulous providers never really have any intention of paying out. Lots of negative publicity on this. With Life Cover alone price is pretty much the only “driver” – the policy pays out on death and you are either dead or alive. No shades of grey here – you cannot be a little bit dead. But with Critical Illness definitions there are considerable shades of grey - such that you need to pick a good well established provider with high levels of Financial Strength and a good claims paying history. I have found myself saying on many an occasion when recommending to a client a CIC plan that is not the cheapest available, that if I am going to recommend a plan with CIC, then I will recommend one that will pay out on a genuine claim. Not one that will fight tooth and nail not to pay anything at all. One other point - I do not recommend CIC cover alone – always go for a plan that gives Live Cover as well. They are no more expensive because the risk s with the CIC cover rather than death but if you have stand alone CIC with no life cover, you usually have to survive 28 days or 30 days after your “Critical Illness” hits you for it to pay out. So have a heart attack/whatever and die 20 days later and the CIC cover alone will not apply as you had the audacity to die within the initial 28/30 days and so NO PAYOUT! - But if you take out a plan that is no more expensive in premium costs, but has Life Cover as well as CIC then that policy WILL pay out. As we are about 14 times more likely to suffer a Critical Illness than die before retirement, life cover is pretty much a freebie, so taking out stand alone CIC is crazy. Link to comment Share on other sites More sharing options...
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