# Advice needed for life insurance.



## annam (3 Sep 2007)

Myself and my husband have decided that we should take life insurance out. We already have an MPP but figure with one child and another on the way we'd need more than just the mortgage paid off. But we're not sure what term or what amount to insure for. Are there guidelines as to what these should be - a multiple of income for instance?

Many thanks in advance


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## ClubMan (3 Sep 2007)

This question (rules of thumb for general life assurance cover) has cropped up a few times but I have not seen a generally applicably answer. Possibly because there is none and it all depends on your lifestyle and general living expenses etc. rather than just income. Perhaps try searching for existing threads on this topic that might contain some useful feedback?


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## RS2K (3 Sep 2007)

I'd recommend getting a financial review done.

A good broker (Authorised Advisors are best) will do this, and make recommendations based on your individual circumstances, and budget.


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## Ravima (3 Sep 2007)

I suppose a very simple calculation, would be to decide what income you would like to have, in the event of a spouse dying. Then calculate the benefits payable under their pension, work out shortfall and work out the lump sum that would pay that amount on current bank returns.

its crude, but is would give a guideline figure. remember, mortgage will be paid off, you will have a survivors pension (assuming spouse paying PRSI) you may have a spouss pension from his/her workplace, but again check the wording of that policy through his/her HR dept as some will stop paying pension should you remarry. 

If taking death of wife/mother into account, do not forget to add on for housekepping expenses, childminding etc as no mater what you think or how liberated/metrosexual you are, womans work in home is usually undervalued for financial purposes.


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## yob (3 Sep 2007)

generally speaking its recommended to use 7 times your annual salary this could be quite expensive so as has been said seek professional advice,my one bit of advice is to make sure its a life assurance term policy only and not one of these life and saving policies which are a waste of money.


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## LDFerguson (3 Sep 2007)

I use a spreadsheet model - it's along the lines of Ravima's answer: - 

(1) Calculate take-home pay

(2) Deduct mortgage repayments as these are already covered

(3) Calculate what size of lump sum you would need to invest to replace this income over a period - typically 20 to 25 years given your kids' ages.  There's plenty of simple modellers on the web to help you calculate income drawdowns from an invested lump sum.   

(4) If a double income household, use the above calculations for each spouse.  If a single income household, substitute full-time child-care costs for non-earning spouse's income.

(5) Deduct any other life assurance cover, which may be included as part of a pension scheme.  

There's no precise science and no multiple of salary that will suit all. 



> my one bit of advice is to make sure its a life assurance term policy only and not one of these life and saving policies which are a waste of money.


 
This is such good advice it deserves to be repeated.  Avoid "whole of life, reviewable premium, combination life assurance and savings" policies like the Bubonic plague.  

Liam D. Ferguson
www.ferga.com


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## ClubMan (3 Sep 2007)

LDFerguson said:


> (2) Deduct mortgage repayments as these are already covered


You mean by the mortgage protection life assurance as opposed to the mortgage repayment insurance cover?


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## LDFerguson (4 Sep 2007)

ClubMan said:


> You mean by the mortgage protection life assurance as opposed to the mortgage repayment insurance cover?


 
Yes - I'm assuming that the original poster has their mortgage covered in the event of death by a Mortgage Protection Life Assurance policy, so the monthly mortgage repayment they're currently paying out of net income would disappear anyway.


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## first_timer (8 Feb 2009)

Hi, I am also trying to calculate how much I should have in life pension cover (my details are in this post http://www.askaboutmoney.com/showthread.php?t=102794 ).
I was thinking around 2500 € for 25 years - could you point me to one of these models to calculate income drawdowns from an invested lump sum? 
or else, how does 320k€ dual cover for 25 years sound like, given my circumstances? 
I was thinking not to go for the indexation option, as the kids would be older and older as the years go by, and would therefore require a lower lump sum to see them until they are financially independent from us.
Would that be reasonable?
Thanks a lot


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