Although not a particularly cheery subject life insurance is worth thinking about, particularly if you own property or have dependants.   If you have a mortgage you should have life cover in place, and you may want to consider  critical illness cover as well.   If you have dependants, you’d want to ensure they were supported financially if anything happened to you, and these types of cover can provide that support.

There are many different life insurance policies and options, which is why it makes sense to discuss the type of cover you’re looking for with an independent financial adviser.  They can look at the whole of the market and tailor cover that best suits your needs. We’d also recommend reviewing your cover on a regular basis, as things change, to ensure your cover continues to meet your requirements.

So what is life insurance, and what options are out there?

Life insurance is an insurance policy that will pay out a sum of money in the event of death, which can be used to repay debts such as a mortgage or left to support loved ones.

What types of life insurance are there?

Term insurance.

This is for a fixed period of time and is often linked to the term of your mortgage, so for example your mortgage is £200,000over 25 years, you may take out life insurance for £200,000 over 25 years.

In addition to this cover you may want to add critical illness cover. This addition means that the policy would pay out the sum assured on diagnosis of one of the conditions covered by the policy should this happen within the policy term. The number of conditions covered varies depending on the provider but is usually in excess of 40.

Whole of life cover

This type of life insurance is for the whole of your life, as opposed to a set period of time. This option is particularly suited to leaving the benefits to family or helping with Inheritance Tax Planning.

My employer provides it, so I don’t need my own

Many employers do provide death in service benefits, these are usually linked to your salary and tend to be a multiple of that.  However, employers can change their policies, so we would recommend seeing this as an ‘extra’ rather than cover that can always be relied upon as employers may withdraw it or you could move to a job where the employer doesn’t offer this. Your own individual cover can continue to remain in force regardless of changes in your circumstances.

Can I afford it?

A better question may be can I afford not to?   If you have a mortgage and passed away, your mortgage provider would be legally entitled to reclaim your property if your estate were insufficient to pay off the balance of the mortgage.  If you have life insurance matching your mortgage loan, the payout could be used to redeem the mortgage ensuring your family would inherit your property.

Is Critical Illness cover worth it, I’m young, fit and healthy.

Many people think that being young and healthy means they are unlikely to have a critical illness. However statistics show that during your working life you are more likely to have a critical illness and survive it than you are to die, a fact that makes critical illness cover well worth considering. Like life cover, the benefits are usually paid as a lump sum on diagnosis and can be extremely valuable at a stressful time when you may not be able to work.

As with most financial planning starting when you are young can be beneficial.  Taking out life insurance  and/or  critical illness cover in your 20’s is cheaper than in your 30’s, 40’s and 50’s as the risk of death and illness is lower. Additionally there are many policies where you can fix the premiums for life, so you know what you’ll be paying each month and this won’t change.

Below are example premiums for a 25 year Level Term Assurance for £200,000 of cover (non-smoker)-

Monthly premium for a 25 year old £5.97

Monthly premium for a 35 year old £10.12

Monthly premium for a 45 year old £22.41

Be honest

Insurers will ask a number of questions when applying for cover and it is important to be honest and disclose all relevant facts. Be truthful about your lifestyle such as how many units of alcohol you drink in a week, and if you are a ‘social smoker’ you will be classed a smoker. Also, it is vital to accurately provide details of any existing or historical health issues that could affect the cover. Inaccuracies, however small may lead to  non-payment of benefits, although this is rare with most insurers paying out in excess of 90% of all claims received.

If you want peace of mind, life insurance is worth it

So, if you have a mortgage and/or a family life insurance is an important insurance which gives you peace of mind that should something happen you’d still have a roof over your head and bills could be paid.  The earlier you start a policy the more affordable it is likely to be.

Our team of friendly independent financial advisers can guide you through the range of policies available and help you choose the cover that best meets your needs now and in the future.  To find out more about our services click here, email us to arrange a free consultation here or by calling 01224 332400.

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