Life Life Insurance for Housewife

annR

Registered User
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I've done a search for this but only found two old threads.

I'm 39, married with 3 young children aged 2 months, 3 and 5. I last looked into our life insurance situation when we were both working. (mortgage protection and also life insurance through work). However in the meantime I have stopped working and I stay at home. Obviously the mortgage and a monthly wage are looked after should anything happen to my husband. But if anything happened to me, there would be childcare required. Fulltime for the youngest until in school, then afterschool care until they are all in secondary, and even then there might be some kind of supervision required after school (I have no idea about that). Also there would be cleaner expenses.

Any comments about what I should look out for or is it pretty straightforward - a term life insurance for the cost of child care/cleaner? I've calculated we'd be looking at about 250k for 17 years - does that sound right? Just interested to see if anyone has gone down this road and what the experience has been.
 
There are two generic types that would suit that requirement - a lump sum payment - the term insurance policy you suggest - or an income on death policy that would pay your husband an income of €X per month in the event of your death until the expiry of the policy term. Again you'd set the policy term to coincide with when your kids are self-sufficient. Income on death tends to be cheaper than lump sum cover, all other things being equal, as the cover is effectively reducing - if you died near the end of the policy term, then the income would only be paid out for a short period.

Liam D. Ferguson
 
It is important to get insurance when young as it will be much cheaper. As you get older when you have to do medical tests etc it may not be possible. Whichever insurance you go for it is a good idea.

Please also look into your social welfare entitlements in relation to your own pension. A lot of women lose out unnecessarily by not thinking through their decision to be a stay at home parent. It may be possible for you to buy years, and I believe you have certain entitlement built up when you stay at home with children.
 
Hi Ann

There are a number of things that you and your husband need to look into:

  1. Are you entitled to State benefits?
  2. Do you have other assets that will provide an income in the event of death?
  3. What debts will be paid off in the event of illness/ death?
  4. Will the surviving spouse work in the event of their spouse dying?
  5. How much will the lifestyle you want your family to have cost?

As mentioned before, there are a few methods of then providing cover:

1. Lump sum. You have to calculate the amount needed based on how much is needed each year and expected investment returns.

2. Reducing cover lump sum. Using a mortgage protection style policy. The cost of childcare now will be much higher than say in 16 years time when the kids will be able to come home from school and look after themselves. Using a reducing term policy allows you to have pay for higher cover now with lower cover then.

3. Monthly income. Instead of getting a large lump sum that you have to manage, the insurance company pays you a monthly, tax free amount each month for the term of the policy. You can also add on a smaller lump sum amount to cover short term needs such as funeral costs, paying off short term debt and some comfort money.



Steven
www.bluewaterfp.ie
 
Any comments about what I should look out for or is it pretty straightforward - a term life insurance for the cost of child care/cleaner?
It is hard to beat a convertible term life policy for value.
 
Thanks for those pointers, definitely useful. Michaelm, what does the convertible mean? Bronte, a good reminder about the pension situation, I should look into that (i.e. start another thread ;))
I was trying to calculate how much we would need and my husband reminded me that I will have to allow for summer holidays full time childcare. . . . more complex than I thought.
 
more complex than I thought.

And that is why it is important to educate yourself so that you end up with the correct policy. Don't buy anything you don't understand and don't be bamboozled by sales talk.

I presume you know that poster LD is a broker with immense knowledge in this area. Perhaps you need to see him. His posts on here are very informative and clear cut. Not sure if Michaelm is also in the business.

To find out about pension/state entitlements you should post in the relevant section of AAM.
 
Thanks for those pointers, definitely useful. Michaelm, what does the convertible mean? Bronte, a good reminder about the pension situation, I should look into that (i.e. start another thread ;))
I was trying to calculate how much we would need and my husband reminded me that I will have to allow for summer holidays full time childcare. . . . more complex than I thought.

Convertible term is an add on to the policy. It give you the option to extend the term of the policy at any time during the lifetime of the plan without any medical underwriting. It is priced, however, at your age at the time of the conversion.


An example of calculating what you need:

Current net take home pay: €3,000
Less mortgage: €1,000
Disposal income: €2,000

On Death
Mortgage paid for
Widow's pension: €1,000

Income needs: €1,000 per month
You can add to that for the extras, so say €1,500 a month

You can take out a policy that will pay you €1,500 a month.
Add on €20,000 for a funeral and another €20,000 comfort money and you also get a lump sum of €40,000.

If you just want a lump sum, we will assume that you invest it in a mix of assets and get a return of 4%. Inflation is 2%.

To provide an income of €1,500 a month, index linked for 17 years, with another lump sum of €40,000 for funeral and comfort money, you will need €303,175.


Steven
www.bluewaterfp.ie
 
Michaelm, what does the convertible mean?
Convertible term is an add on to the policy. It give you the option to extend the term of the policy at any time during the lifetime of the plan without any medical underwriting. It is priced, however, at your age at the time of the conversion.
As SBarrett says but it adds very little to the cost of the policy. I did a back-of-the-envelope calculation as to what lump-sum one of us would need and then took out a dual, non-indexed, convertible term life policy which would see us beyond the youngest being 20. LA Brokers (no connection) are good for instant quotes and heavy first year discounts (I got my last policy from them on a Fiver Friday which was sweet).
 
For €300,000 cover for two 39 year olds for 17 years, it costs €51 per month and €55 with conversion option.

If at the end of the term, you use the conversion option to extend the term to age 65, it will cost €177 per month for the following 9 years.

Steven
www.bluewaterfp.ie
 
LD& Steven;
Question for you and it might inform annR and me.

We know she wants cover for circa k250 for 17 years to look after kids.I would think she may need cover on policy for husband as well?

Is it much dearer to have cover for her and husband not just on 1st to die but to retain cover in case 2nd dies before kids can look after themselves on the one policy?

ie. say k250 cover should she/he die and still hold k250 cover in case she/he also dies?
 
For €300,000 cover for two 39 year olds for 17 years, it costs €51 per month and €55 with conversion option. If at the end of the term, you use the conversion option to extend the term to age 65, it will cost €177 per month for the following 9 years.
AFAIK you can use the conversion option but reduce the lump-sum amount.
Is it much dearer to have cover for her and husband not just on 1st to die but to retain cover in case 2nd dies before kids can look after themselves on the one policy?
It's not much dearer to go for a Dual over Joint policy. I tried same figures above (€300,000 cover for two 39 year olds for 17 years with conversion option) on the interweb and the quote was €49 per month for a Joint policy and €50 Dual policy.
 
LD& Steven;
Question for you and it might inform annR and me.

We know she wants cover for circa k250 for 17 years to look after kids.I would think she may need cover on policy for husband as well?

Is it much dearer to have cover for her and husband not just on 1st to die but to retain cover in case 2nd dies before kids can look after themselves on the one policy?

ie. say k250 cover should she/he die and still hold k250 cover in case she/he also dies?

Hi Gerry

No, it's not that more expensive. €250k on a joint life (one potential payout) is €43 a month. Dual life (two potential payouts) is €47 per month.


Steven
www.bluewaterfp.ie
 
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