The biggest error we see is breadwinners not protecting their families properly. The “standard” seems to be to have enough life cover to clear the mortgage if a breadwinner dies. Some do not even have that.
Dying young is, thankfully, a rare occurrence. But it does happen and to devastating effect, survivors often have to:
1. Sell the house
and/or
2. Slash spending
and/or
3. Rely on parents
and/or
4. Rely on the State
and/or
5. Work to maximise income
and/or
6. Find a new partner with good financials.
All whilst dealing with the grief of losing you.
Not having a mortgage is good, but your wages covered more than just the mortgage. The balance between your net pay and mortgage payments should be covered. Your family are relying on that money too.
For example:
- You take home £3,000 pm, your mortgage is £1,750 pm, which leaves £1,250 pm.
- Your family need that money for food, bills, clothes, education, holidays, cars etc.
- Now you are dead and they are short £15,000 pa.
- You should have additional life cover of £15,000 x years to stopping work, e.g., £15,000 x 20 years = £300,000 additional life cover.
This is the bare minimum. You should think about the pension income your family will no longer receive (both employer and State), the house deposits and weddings and all the other one-offs you are not there to fund.
The cost of life cover is tiny compared to the benefit. Still, there are ways to reduce it further:
- Each year your mortgage balance falls and a year of essential costs have been paid. The amount of cover can drop too.
- The cover could end sooner. For example, when your youngest child reaches 21.
That leaves the survivor to “make the best of it” on their own.
Hardly a warm loving embrace, but better than a slap in the face.
No family has EVER uttered these words:
“What was Brian / Briony thinking? We have way too much money now they are gone! What are we going to do with all of it?!”
MANY families have uttered these words:
“Jesus, we’re screwed, how the hell are we going to make ends meet?”
A few families have uttered these words:
“We miss you so much Brian/Briony, thank you for doing this for us. Now we won’t be forced to take the sort of horrible decisions we might have had to.”
Who says money isn’t love?