Life Am I over-insured?

P

Protocol

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I sometimes wonder am I /us over-insured?

On top of health/motor/house insurance, there are the following policies:

  • Death-in-service Benefit as part of DB pension = 1x to 1.5x salary
  • Optional extra Death Benefit, arranged by employer, for 2.5x salary, premium is 0.36% gross, so 0.216% net
  • Income protection, arranged by employer, premium is 0.86% gross, so 0.516% net after tax relief
  • Life policy on wife, was 100 euro for 100k over 25 years, has indexed over maybe five years to 147 pa
  • MPP2 on house mortgage
  • MPP1 on previous house, now sold, kept MPP as cheap at 100pa, original 20yr mortgage taken out in 2005, so cover will have declined a lot by now

I realise it is a subjective question, and it depends on attitudes to risk. My wife is a SAHP.

I welcome any comments.
 
Some other important factors missing. There's a Mrs Protocol. Are there many Little Protocols running around? Have you accessible savings?

I'd do an exercise to figure out what the monthly cost of running the Protocol household is at the moment. Your take-home pay, less the mortgage repayment, less whatever amount you're saving (if anything) per month at present. If you die, that's what needs to be replaced. Wife will get State Widows pension, roughly €200 per week. If she needs to supplement it, that comes out of savings and life insurance. So how long will the savings / life insurance last? Is there also enough there to pay for the kids' college if relevant? Do you want to leave the kids a legacy sum, e.g. a deposit on a house?

If Mrs P dies, will you need to pay for childcare? Will the absence of a mortgage repayment pay for that? You'd also get the State Widowers pension. My guess would be that your wife has enough insurance; not so sure about you.
 
Thanks.

Two children.

Monthly running cost is roughly 2,360. That calculation is (net wage after tax/USC/PRSI/pension conts/work-related insurances) minus mortgage minus 2021 regular savings.

If I die, I presume wife gets:

(1) mortgage cleared
(2) old MPP pay out = small
(3) 4x gross salary lump-sum = >300k
(4) work pension plus work pension per child = I think this is half what i would have got? I checked and my wife would get 1/2 of my potential pension at age 65, and kids get 1/6 of potential pension each
(5) State widows pension


As it is a PS pension, I presume (4) and (5) are integrated?

My potential pension at 65, incl State Pension, is 40k approx, so if I die tomorrow, it seems my wife gets 20k?
 
What is your salary and how old are your kids?

I always caution clients on reducing their life cover. It is relatively cheap anyway. If there is a claim, it is going to be a very traumatic event for the rest of the family and it is impossible to know how you will all react or what the future will look like afterwards. Having a decent chunk of money will provide you with options.

I have had several conversations with women who's husbands have died and left life policies for €70k - €80k. With a household to run and kids to educate and look after, that money is quickly used up and they haven't many options left. So I would be careful in reducing that cover and from first glance, it would look like you have underinsured your wife.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Dave Vanian said:
If Mrs P dies, will you need to pay for childcare? Will the absence of a mortgage repayment pay for that? You'd also get the State Widowers pension. My guess would be that your wife has enough insurance; not so sure about you.
Click to expand...

Yes, but as both in school, childcare costs shouldn't be too high.

Would mortgage repayment cover that? Yes.
 

Thanks.
80k approx
6 and 10

I don't intend to reduce any cover, I was just wondering / pondering about the various policies.
 
I would say you are both a bit light on life cover. If you died, your wife gets your public service pension, so that's a good source of regular income.

Upon re-reading the thread, there is one area where I would differ from Dave's method of calculations. I would base it on lost take home pay. While I would deduct the mortgage from that figure, I wouldn't deduct savings. If you were alive, you would be using savings in the future for purchases. If you had pared everything back to the bare minimum, where does money come from for holidays, new car, house repairs/ updating etc. This is all expenditure that would come out of savings.

Also, in the future, your levels of savings may reduce. Your kids will get more expensive as they go to secondary school and you're paying for mobile phones, new clothes, going out with friends etc. and that's before college.

I would certainly keep what you have in place.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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