Why it’s important to review your life cover and income protection

housing protectionA Case Study

BACKGROUND

Clients new to Manchester Mortgages who lived in Wythenshawe contacted us to review their life cover, income protection, and redundancy cover.

They had taken out policies with another broker 5 years earlier and were unsure what cover they had and wanted to know would it meet their current circumstances.

They were married, both in their early 40’s with a child aged 3, Mr being a Solicitor, employed earning £ 52,000 per year and Mrs a house person looking after their child.

They had a joint mortgage on their residential home of £160,000 with Mr recently buying a Buy to Let property in Stockport in his sole name with a mortgage of £88,000 outstanding.

EXISTING COVER

They had a joint life policy which would pay out £235,000 on either death with 23 years remaining – the policy was on a level basis which means the amount of life cover available would always be £ 235,000.

Mr had a policy which would pay £ 800 per month benefit in the event of him being made redundant.

Mr also had a policy which would pay £ 800 per month in the event of him being unable to work due to accident or illness – this policy had a waiting period of 8 weeks and paid out a maximum 2 years for each claim.

The total cost for the above 3 policies was £ 75 per month.

Both clients were none smokers and in good health.

some recommendationsRECOMMENDATIONS

After fully discussing clients circumstances and expectations to what was important to them Manchester Mortgages arranged the following policies –

Life Cover

A policy for £ 450,000 life cover was arranged for Mr which was taken on a level basis over 25 years – the cover will provide sufficient funds to repay the residential and buy to let mortgages in his name and also provide a lump sum around £ 200,000 for his wife and child.

A policy for £300,000 life cover was arranged for Mrs which again was taken over 25 years – the cover will provide sufficient funds to repay the residential mortgage and provide a lump sum of around £ 140,000 for child care.

By taking out policies in each name the amount of life cover provided in the event of both deaths within the next 25 years would be £ 750,000 – the existing life policy would only have paid out a maximum of £ 235,000. (Click here for more about our life cover)

Redundancy Cover

Mr confirmed that he did not want to be covered for redundancy cover as in the event of losing his job he was confident he would always be able to obtain another employment and would prefer to re-direct the monthly premiums to provide additional protection. (More about redundancy protection)

Income Protection

Mr requested that his monthly benefit be increased to £ 2,000 per month on the same basis as his existing policy. (Click for more about income protection).

SUMMARY

All the above recommendations were taken by our clients and the premiums totalled £ 95 per month – £ 20 per month than the previous policies ( which were cancelled once the new policies were underwritten and placed on risk ).

Although clients are paying slightly more than before they have the cover which meets their current circumstances – it is important to review your cover especially once you have children or increase your mortgage commitments.

Please contact Manchester Mortgages on 0161 706 0242 for all your mortgage and protection needs