Life cover – ‘get it whilst it’s cheap’
As high streets up and down the UK fall quiet with no market traders telling you what the best deal is, I will pick up the baton temporarily left behind with a well-known phrase heard in the high street markets and apply it to life insurance – ‘get it whilst it’s cheap’.
What is life insurance?
Life insurance is designed to pay your dependents a lump sum in the event of your death. The amount of money that is paid out is dependent on the level of cover you choose at the outset of the plan. You pay the premiums to the insurance company usually on a monthly basis.
There are two main types of life insurance. One is term assurance, which only pays out in the event of your death within the term of the policy (e.g. 20 years) and the other is whole of life which pays out in the event of your death.
Do I need life insurance?
If you have a mortgage or any other forms of debt/lending that you would like to be paid off in the event of your death in order that the burden does not fall onto your family/dependents, then you may wish to consider life cover.
Whilst you may have existing life cover or ‘death in service’ through your employer, ask yourself if this is enough to cover your debts and would you like to leave a bit extra to your family in the event of your death? Relying on your death in service scheme may also be risky as if you stop working for them, then you will not ordinarily continue to be covered.
The COVID-19 pandemic has really brought insurance to forefront of people’s minds ensuring that should the worse happen, that their families are financially protected.
If it is likely that you will have an inheritance tax charge on your death, then life insurance can be a simple solution to this, to provide funds to your dependents in order to pay any tax due.
Alternatively, you may wish you take out cover in the event of your death to pay such things as funeral expenses – and with some providers, get a free parker pen whilst you are at it!
How much does it cost?
One of the common reasons for not having life insurance is the cost. The cost of the premiums is dependent on the cover you choose and is based on various factors such as age, health and lifestyle.
The younger and healthier you are and less likely to die from a medical condition, the cheaper the insurance may also likely be. Therefore, please bear in mind how much cover may be required in the future, as when you are older and more likely to have a medical condition, the cost may be higher.
The younger and healthier you are, the cheaper the premium will likely be, dependent on your own particular circumstances.
What should I do?
For many, ensuring that their family is covered in the event of their death gives them peace of mind.
Therefore, it is key to ensure that you review any existing plans and any death in service plans to ensure that the level of cover is at a level where you feel that your dependents will be able to at least pay off any debts and/or expenses.
Also, take into consideration any future financial needs that your dependents may have as you may want to ensure that there is a sum of money available to cover this.
The earlier you do this, the cheaper the cover will likely be!
To discuss the most appropriate life insurance policy for your circumstances and budget, or to review an existing policy please contact our Financial Planning team on +44 (0)1227 768231 or provide your details on our online enquiry form.
The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.
You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.
Kreston Reeves Financial Planning Limited, Independent Financial Advisers. Authorised and regulated by the Financial Conduct Authority.
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