Life Insurance: What you need to know

When is the right age to get life insurance? When is the right time?

It’s funny how we tend to treat life insurance in the same way we treat travel insurance. We only tend to think about it when we’re reminded of our finite lifespan. It could be a huge life event like a relative or friend dying or something as simple as noticing you don’t move as quickly as you used to that leads you to reflect on what would happen if your own life were to end.

Who would pay the mortgage? What would be left for your partner or your children? Who will inherit your belongings, your financial responsibilities, and benefits?

Plenty of people have decided to take out a life insurance policy after seeing somebody close to them go through the awful scenario of having to sell the family home because they can’t keep up with the mortgage or simply the ongoing maintenance costs for the property. Or even less fortunately, being saddled with the debt of the recently deceased family member with no means to pay it. All while trying to process the grief and sadness of losing a loved one.

Actually, life insurance is much more akin to car or home insurance. If you drive a car or own your home, you’ll have insurance in the event that something should happen, and although we don’t treat it that way life insurance is no different.

Do you need life insurance?

If you have:

• Dependents – school age children, for example

• A partner or spouse – who relies on your income

• A mortgage – or other financial responsibilities

In essence, if there is anything or anyone you want to provide for after you die, then it’s a good idea to get life insurance.

Who doesn’t need life insurance?

There are a few scenarios where you may not need a life insurance policy.

• You are single

• Your partner earns enough for your family to live on in the event of your death

• Your household is on a low income and your partner could be eligible for state benefits

You might not be sure whether to get life insurance or not. If that’s you, it’s a sensible idea to get independent financial advice so you can decide with a professional what would be best for your circumstances.

How much does life insurance cost?

It’s no surprise that life insurance, much like other insurance policies can vary depending on your circumstances. Premiums can also vary so it’s a good idea to shop around to make sure you’re getting the best value. An Independent Financial Advisor will be able to suggest options available to you once you’ve both talked through your wishes.

The price you pay for life insurance can vary depending on:
– Your age, health & lifestyle
– Whether you smoke
– The term of the policy
– The amount of cover you need

As an example, the younger you are, potentially the less likely you are to fall ill or die from a medical condition, which means your policy is likely to be cheaper. Another reason to get your life insurance sooner rather than later.

How should I choose my insurance policy?

There really are plenty to choose from and ultimately the best insurance provider is one which suits your needs but how can you make sure you’re taking out the right policy?

There are two main types of life insurance:

Term Assurance policies

These run for a fixed period of time – 5, 10 or 50 years for example. These kinds of policies pay-out if you die during the ‘term’ of the policy (the length of time you are covered for) and doesn’t have a lump sum payable at the end of the policy term.

A whole-of-life policy

These policies will pay out no matter when you die as long as you keep up with your premium payments.

Most comparison sites will be able to give you an overview of different policies to choose from once you’ve entered your information. If you want to make sure you’ve covered everything, it may be worth speaking to an Independent Financial Advisor to figure out the best type of policy and life insurance for you.

Important things to remember

Exclusions

Most policies will have a certain number of exclusions which would also invalidate the policy or that the policy would not pay out for: Sky diving or scuba diving, for example. Some medications will also mean that the policy won’t pay out in the event that you die as a result of side effects or pre-existing conditions if these have not been disclosed. It’s worth checking through the entire policy with care to make sure you’ll be paying for something which will still cover your needs.

Inevitably, we all tend to leave behind expenses, even if just for the funeral. While it can seem a sombre subject that you want to avoid, it’s worth thinking about whether a life insurance policy would benefit you and talking to someone about the best policy for your need if it would.

If you have any questions or wanted to discuss life insurance policies further, you can always contact me and I’ll get back in touch with you. Sites like the Money Advice Service can provide free advice and information about life insurance too. Either way, try not to avoid ticking it off the to-do list if it’s something you’ve been thinking about.