Mr and Mrs A, aged 40 and 42 are divorcing. They have a family home in which Mrs A is still living with their two children, aged 3 and 5 with a mortgage of £100,000. Mr is living with family and will rent a property once the divorce is through. They are both employed and although they have life cover through work, they only have statutory sick pay and their jobs are not guaranteed, meaning they could lose their life cover is they lost their jobs. Mr A is the main earner and will be paying maintenance of £500 per child until they each reach age 18. Mrs A only works part time as she has historically looked after the children.
Their first instinct is to purchase life insurance including critical illness, so if either of them pass away the mortgage is paid off. We looked at a joint decreasing life insurance policy which reduces in line with a repayment mortgage, this would cost £78.31 per month to include critical illness or £11.92 per month without.
It is also important for Mr A to consider protecting his income as he only gets 4 weeks sick pay from work. We looked at full income protection of £2,000 per month so he could still make the maintenance payment and also have a little left to live. This could be provided for a monthly premium of £83.60 or to keep the cost down he could reduce the cover to pay out for a maximum of 2 years which would reduce the cost to £31.60 per month.
Probably the most important policy, the bare minimum that should be considered is a family income benefit policy on each parent. If either should pass away the other parent would have an income until the children are independent (usually between the ages of 18 and 24). If both were to pass away, then both policies would pay out increasing the amount available to bring the children up and pay for schooling, trips or possibly things like their first car.
For a policy that would pay out a monthly amount of £2,000 per person and which runs for 18 years, the cost would be £13.03 per month for Mr A and £15.04 per month for Mrs A.
Prices are correct as of August 2024.
Please note that any premiums mentioned are indicative only and based on this specific example, which is shown for information purposes only. Premiums shown are an average of the 5 cheapest insurers. Your own circumstances will determine whether the amount payable is more or less than the figure quoted.
