Hi All,
Recently turned 21, and thought it might be time to get my shit together, or am I still too young?
Been given a quote from Tom after being nagged with phone calls for days:
£190,000 life insurance (£9.48pm)
£25,000 serious illness (£8.12 pm - Still a student)
Together £17.60, apparently their lowest rate.
Do any lifers have any experience in the field, is it too early? How much will it increase if I leave it?
Any help is much appreciated, thanks in advance!
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No mortgage or dependents, it is just wasted money at the moment.
Just stick to critical illness cover
However, speaking as a financial adviser of 30+ years, I have to ask what are you trying to protect and why ? Do you have dependants ? (assuming not if you are just 21). I'm not sure what the FCA rules are now on young people taking out Life cover when there is no need but years ago it was very much frowned upon. Who is going to get the £190k and why do they need it ? Is it to cover a mortgage (again, I doubt it due to your age & you being a student) and how was the amount insured calculated (again, its not salary based is it ?)
Serious illness cover (if you mean critical illness cover) is different and will pay out a lump sum should you contract one of the many illness stated in the policy (all companies are different with their definitions but there are ABI standards such as Heart Attack, Cancer, Stroke, MS etc etc).
To my mind, and without knowing you or your circumstances, (and any regulated Financial Adviser has to do a "fact find" so as to "know their client") I would say that maybe you are being "mis-sold" this and should think again as to why you are taking out this cover.
Other questions - who is Tom ? How long is the cover for ? (assuming its term assurance and not whole of life for that premium).
In the scheme of things £17.60 pm is not a lot of money and if you can afford it then great. But is the level of cover & the term correct for YOU at this time in your life.
When I worked for the BMA we had a baseline for Insurance. Bearing in mind we were dealing mainly with Junior Doctors at this time we would advise, in order of importance, the following -
Income Protection
Critical Illness
Life Assurance
Savings
Investments
Pension
- Pension being the lowest as they would already be in the NHS Pension Scheme and Income Protection being the first priority as you would then have income during your working life should you have an accident or illness that meant you could not work for any period of time. Remember, Income Protection and Critical Illness cover are not the same. IP pays out a regular (usually monthly) amount that enables you to continue to pay the bills if you are unable to work. CI cover pays out a lump sum on diagnosis of a specified critical illness. Both could pay out or either one could, depending on what it is you have suffered.
I'm sure others on here will have their thoughts on this & in no way would I want to discourage anyone to not be insured - but ask yourself who is going to benefit if you die & how much do they actually need.
One thing you may want to consider instead of life insurance (but would echo what people have regarding income protection/critical illness cover) is private health insurance so that should anything happen you have access to a better standard of healthcare. Of course this isn't a necessity as we're very lucky to have the NHS in this country, but I would argue this would offer greater peace of mind given where you are in your life currently.
In all honesty, a lot of the stuff mentioned has gone over my head, I think I'll wait til later on to look into stuff like this!
In the meantime gonna splash out and stick that money into my premium bonds monthly. (Ik I live on the wild side)
Thanks to everyone for their advice, I can imagine this thread can be closed now!
I'm assuming its a level term plan. ie, the £190k of life assurance stays the same during the term of the plan (whereas you can get decreasing term assurance and even increasing term). Also, how long is the term ? 20 years ? 30 years ? until retirement ?
so many questions....
Last house I bought I didn't bother with life insurance because the my pension scheme paid out on death 4X salary and other bits so there was not much point.
Say you had left that Company and didn't have Death-in-service and in between times you had suffered an illness or something that made you un-insurable, or at least made the premiums a lot more (known as a loading). You would then have no cover at all.
You should always insure yourself/your mortgage in addition to any DIS benefits you might have, because those DIS benefits might not always be there.
But is it with profit or not? I am not sure what a without profit life assurance policy brings to the table. As the name suggests, you don't benefit from any profits achieved and only a fixed sum is paid out.
So, take you example, £190,000 - is that just paid out upon your death or is it a decreasing cover policy to meet the value of an outstanding mortgage?
I assume the first. So your biggest enemy is inflation. Let's hope for the best and assume you'll live for 50 years. What's £190k going to buy your loved ones in 50 years time? With luck, a packet of peanuts and a round of drinks at your wake.
I looked up Tom. They seem to think they specialise in selling insurance to Dads. Are you one? In any event that seems like a strange concept to me. Many families think about insuring the bread-winner, but less so the traditional home-maker. But if that person dies the bread-winner would probably have to give up work to look after the family. So both should be covered I'd have thought.
In short, you need an honest professional to advise you and not mis-sell you something you don't need.
You could take it & keep it in your back pocket for the rest of your employed years. You'll always have that cover no matter what life throws at you, and seeing as average earnings are currently around £35kpa that's over 5x income. Enough to cover a smallish mortgage or enough to help a spouse/partner bring up a family should you rent instead. Not to be sniffed at.
Problem is, did you meet the man from Tom. Did he go through a fact find and ask you what you want out of life, your dreams & aspirations. Would the money be better off in an ISA, Pension or Premium Bonds ?