Evaluating my insurance

So, further to my contemplation moment, I have been digging into my current cover and what this may mean for me. As we approach end of tax year, I can also change my benefits package so I want to be ready – I only have a week or two to make these changes so I want to be ready. Sadly I can’t look at it for now for another 2 weeks whilst they prepare for the 2018 – 2019 year.

Right now with all the opportunities at my current company, I can’t see me moving for a good few years by which time I am confident I will be comfortable enough to cover this with the mortgage coming down. The question I always ask myself is, “Could I see myself retiring from this job”. The answer right now is yes – for the first time ever.

So first up – payment on my demise. My company actually has death in service benefit (I need to check if this pays out while I am on holiday / weekend etc.) which I hope I can take up to to cover the outstanding mortgage. On the assumption I can dial it up enough to cover the outstanding mortgage (which will of course reduce month on month), then this means I can kill off one of the insurances.

Unemployment Income protection. So I do have this outside of my companies benefits, but not with them. If I were to cancel this the only risk is if I lose my job at work. I certainly don’t intend to be fired (in the sense of out of a job), so the risk would be redundancy.

I’ve been given notice / put at risk of redundancy on multiple occasions – not a nice feeling, but I’ve never been made redundant. If I were to be made redundant I would be made some form of offer, and I would be able to find a new job before I run out of cash.

Given this, I am going to be bullish and say I won’t need this, but I do need to build up some cash reserves.

So, this just leaves the income / critical illness insurance. I can elect exactly how much of my salary as a percentage I can take as income, so I can dial this up so that I can not only cover my basic expenses, but also save and invest – or overpay the mortgage for the few years it applies.

I’ve got all the previous years insurance documents that I am still reading through (and will bounce past my IFA – he does need to earn his fees!) but the first conversation was a good open discussion. Given where we are now it looks likely that I will drop the insurance, however I will only know this for certain once I can change my benefits.

Right now I am so certain that I will be able to drop private insurances for now that I will start looking at which Investment Trust to put the premiums in! I won’t be changing anything until the new tax year so I have some time to just be comfortable with my decision.

Will I be able to sleep at night if I cancel the insurance? Yes – provided the numbers add up! Adding the premiums into my ISA for the next 7 years would, at roughly 5% returns, add a good extra bit to my total pot when I retire.

I plan to do the same with the premium investment trust as I do with my cash reserve experiment. I will drip feed each month and reinvest the dividends. Mentally I am also setting myself that I can sell this if the need arises (unlike my main ISA) to cover expenses as it is “free” money that was going into insurance.

I have a strong sense that I am over insured at the minute but until I finish running the numbers I won’t be certain. The only reason I am looking at it now is how much my investments have grown over the last few years – the bull market has been good to me, and rebalancing has taken out a chunk of the volatility.

I am a little apprehensive at the minute, but once I gain access to the new benefits I will be able to run the numbers and be comfortable…. watch this space!



Author: fireinlondon

Fighting the high cost of living in London

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