What's a sensible level of life insurance to take out?

cully

Registered User
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32
Hi,
Reviewing financial situation at the moment and looking to increase life cover for myself (39)and possibly my wife(38).
We have two kids aged 6 and 3 and would like to ensure they would be comfortable in the event of both or either of our deaths.
Currently have mortgage protection- joint life, first death.
Also have 350k in dual life term plan to age 65.
My pension will pay 300k death in service lump sum and my wife's pension will pay 190k death in service benefit in the event of us dying in service.
Was considering taking out an additional 750k life cover on myself until age 65- quotes are very reasonable at 74 euro per month. To make this a dual life term policy with my wife would cost about €130 per month.
Is this increased level of cover overkill?
Have received very sound financial advice down the years from this site so would appreciate advice,
Thanks ,
cully
 
Well if you died, your wife would have the house mortgage free, €300k from your employer, and €350k from dual life term plan. Do I understand that correctly? Would she continue to work, what additional costs would she face, child care perhaps. Would she have enough to live on. It seems to me she would, but of course you know your circumstances and expectations better.

If your wife died you would have a smaller lump sum from her employer. Would you continue to work? What expenses would you face.

If you both died, the first question is who would look after the children. Have you a plan in place for this. The lump sums would probably pay for their upkeep and education and the house would be available also.

Extra insurance seems overkill to me. Use the money for a holiday.
 
Hi Cremeegg ,
You are correct on first point. She would also have my pensions ( deferred Db scheme and current executive pension) when they pay out. I would not want her to have to work in the event of my death and want her to be able to just mind the kids.
Re myself and the lower payout on her death- I am fine with that. I would have better earning potential and would require childcare.
Have no plans for who minds them in the event we both die- have 5 siblings and would hope they would mind them ( but have never broached the subject).
Have discussed this with a financial advisor and they are gone away to look at policy's that pay a certain sum each month for a certain term rather than lump sum term life insurance. I don't want her to have to worry about investing a large sum of money and she would prefer that she received a set sum each month. Waiting on quotes back and will decide what route to go down then.
 
I'm with Cremeegg - any additional life cover looks like overkill to me.

No doubt the brokers will be on shortly to disagree with us!;)

In the unlikely event that you were to pass away, your wife would have €650k, plus a paid off house, plus the aggregate value of your pension entitlements. For the sake of argument, let's say the transfer value of your aggregate pension entitlements today is €350k, that would leave total assets of €1 million plus a paid off house. Invested conservatively and drawn down at a rate of 3% per annum, that equates to €30k per annum, which should comfortably last a lifetime. I would have thought that anybody could comfortably raise a family on €30k per annum if they have no rent or mortgage to worry about.

Bear in mind that your kids won't always be 6 and 3. Your wife may well chose to re-enter the workforce when your kids are older.

I would be much more concerned about ensuring that you have adequate permanent health insurance (PHI) in place. The sad reality is that a long term illness can have a much more detrimental impact on a family's finances than a death.

You should obviously have a will in place and I would have thought that having nominated guardians makes a lot of sense.
 
I'm with Cremeegg - any additional life cover looks like overkill to me.

No doubt the brokers will be on shortly to disagree with us!;)

In the unlikely event that you were to pass away, your wife would have €650k, plus a paid off house, plus the aggregate value of your pension entitlements. For the sake of argument, let's say the transfer value of your aggregate pension entitlements today is €350k, that would leave total assets of €1 million plus a paid off house. Invested conservatively and drawn down at a rate of 3% per annum, that equates to €30k per annum, which should comfortably last a lifetime. I would have thought that anybody could comfortably raise a family on €30k per annum if they have no rent or mortgage to worry about.

Bear in mind that your kids won't always be 6 and 3. Your wife may well chose to re-enter the workforce when your kids are older.

I would be much more concerned about ensuring that you have adequate permanent health insurance (PHI) in place. The sad reality is that a long term illness can have a much more detrimental impact on a family's finances than a death.

You should obviously have a will in place and I would have thought that having nominated guardians makes a lot of sense.

Not necessarily :)

I couldn't possibly know how much is enough. Life cover has two purposes, pay off debt and replace lost income.

Does the OP have other debts that need to be paid off besides his mortgage? Will they be paid off from proceeds of a life cover policy?

How much income needs to be replaced?

Start with net income
Less mortgage (as this has been paid off)
Less Widow's pension (about €1,000 a month)

Then you have comfort money. If either of you die, there may be time off work with the children, bringing them to Disneyland etc. The premature death of a loved one is an incredibly emotional event. You want the time to grieve and look after your kids without the pressures of having to go to work to earn an income.

The monthly payment life cover plan is a great plan. The New Ireland one is better than the Zurich one simply because the indexation of the Zurich one is very high and is gets expensive very quickly.

So, it could be too much cover, it could be too little. Life cover amounts shouldn't just be picked out of the sky, it should be calculated.

I am 100% behind you with PHI. People are put off by the price of it, thinking "I'm fit and young, it will never happen me". Most of the time, it is taken out of your hands. You don't have to be unhealthy to get cancer. People are in increasingly more demanding jobs, which could put them under a lot of stress, which leads to time off work.

In the worst cases, you could be unable to work. State disability is €10,000 a year. Could you live on that?


Steven
www.bluewaterfp.ie
 
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