Planning ahead - is my life insurance level correct and next steps

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Familyman77

Registered User
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Placed this is another forum but maybe this is the better forum as its future planning


Personal details

Age:46
Spouse's age:40
Partner's age if not married:

Number and age of children:
7 and 11

Income and expenditure
Annual gross income from employment or profession:
Annual gross income of spouse/partner: n/a

Monthly take-home pay: €5900 ( includes average mileage allowance)

Type of employment - e.g. Employee or self-employed. Employee
Employer type: e.g. public servant, private company. Private

In general are you:
(a) spending more than you earn, or
(b) saving?

Need to save now after overpaying mortgage


Summary of Assets and Liabilities
Family home value: €380k
Mortgage on family home: N/A
Net equity: 380k

Cash: €10k
Defined Contribution pension fund:
Company shares : N/a
Buy to Let Property value: N/a
Buy to let Mortgage: N/a

Total net assets:


Family home mortgage information
Lender N/a
Interest rate
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1%

Remaining term: (Original term is not relevant)
Monthly repayment: N/a

Other borrowings – car loans/personal loans etc - no other borrowings will need about 20k for a car in a year or 2

Do you pay off your full credit card balance each month? No credit card
If not, what is the balance on your credit card?

Pension information

Value of pension fund: €485k

Executive pension fund with contribution expectations of 30k per annum in addition to wage

Buy to let properties
Value: 0
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:


Other information which might be relevant

Life insurance: Term policy from old mortgage €275k until 2039, €100k death in service policy


What specific question do you have or what issues are of concern to you?

1. As single earner should I be looking at income protection or a more comprehensive life insurance

2. My next intention is to build up cash reserves again and then where should my focus lie for the next few years

Thanks in advance
 
As a start, you need to work out how much income your family would lose if you died (loss of salary, etc), how much income they would gain (widow's pension, ...), how much living expenses would change (one less mouth to feed, clothe, etc)
Multiply the annual change by the number of years left to dependants, subtract any death in service payments and that will give a good starting point
 
Very quick look at it...

Cost of running household is around €4,000 per month net. In the event of your death, this needs to be replaced, less an allowance for the fact that the household will cost less to run without you in it. State Widow's Pension would pay roughly €1,000 per month. So life cover to replace €3,000 per month for 18 - 20 years to see your younger child out the gap. A couple of ways of doing this: €3,000 x 12 x 18 = €648,000, less €375,000 existing cover = a requirement for around €273,000 additional life cover.

Or ... the existing €375,000 would stretch over 18 years to around €1,700 per month. You can buy a life insurance policy that would pay your spouse an additional €1,300 per month until 2044 in the event of your death, instead of a lump sum. This is cheaper than a lump sum policy.

The financial cost of paying to replace the work of a stay-at-home spouse in the event of their death is harder to quantify. Royal London had a stab at it here. You could make an estimate and apply the same logic as above to the calculations.

Is there an Income Protection scheme at your place of work? If not, Income Protection is important, especially so for a single-income household.

After that, use the balance of the former mortgage repayment to build the savings back up, then think about increasing pension contributions. But don't forget to leave a little aside for having fun now!

Regards,

Liam
www.FergA.com
 
LDFerguson said:
Very quick look at it...

Cost of running household is around €4,000 per month net. In the event of your death, this needs to be replaced, less an allowance for the fact that the household will cost less to run without you in it. State Widow's Pension would pay roughly €1,000 per month. So life cover to replace €3,000 per month for 18 - 20 years to see your younger child out the gap. A couple of ways of doing this: €3,000 x 12 x 18 = €648,000, less €375,000 existing cover = a requirement for around €273,000 additional life cover.

Or ... the existing €375,000 would stretch over 18 years to around €1,700 per month. You can buy a life insurance policy that would pay your spouse an additional €1,300 per month until 2044 in the event of your death, instead of a lump sum. This is cheaper than a lump sum policy.

The financial cost of paying to replace the work of a stay-at-home spouse in the event of their death is harder to quantify. Royal London had a stab at it here. You could make an estimate and apply the same logic as above to the calculations.

Is there an Income Protection scheme at your place of work? If not, Income Protection is important, especially so for a single-income household.

After that, use the balance of the former mortgage repayment to build the savings back up, then think about increasing pension contributions. But don't forget to leave a little aside for having fun now!

Regards,

Liam
www.FergA.com
Click to expand...
Liam, thanks for the detailed reply. Like you said there we also want to have a little extra aside now to do the small things we would have looked over the past few years. We want to see some merit from the overpaying
 
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