We have talked before about life insurance, but with an ever-changing economic climate and as individual circumstances never stay the same for long it is worth reminding ourselves what life insurance is for as we move towards the new year.
Not everyone needs life insurance, but if your family depend on your income to cover the mortgage or other living expenses, then the answer you probably do want life insurance, since it will help provide for your family in the event of your death. Life insurance is designed to provide you with the reassurance that your dependents will be looked after if you’re no longer there to provide. By paying a lump sum or regular payments to cover outgoings. The amount paid out depends on the level of cover. You can decide how it is paid out and whether it will cover specific payments, such as mortgage or rent.
When planning something as individual as life insurance it always pays to take advice as there are some pitfalls that a broker can help you avoid.
Low Start Policies:
If you look at price comparison sites these often come out on top. However the monthly premium increases throughout the term of the policy. What may be an affordable policy in the early years could cost you much more over the whole term than taking out the same cover under a level-term policy, where your monthly premiums will stay the same.
Joint or Individual Policies?
If you are looking to cover both yourself and your partner, two single-life policies may offer much better value than a joint-life one. Two individual policies will often be no more expensive than a joint policy, and if both partners die within the period covered by the policies both their dependents will benefit. A joint policy ends on the death of one partner, so if the surviving spouse wants to continue the cover they would pay more for the cover as they will be older than at the start of the original policy
Changing Financial Needs:
The only constant in life is change, something many life insurance policyholders don’t account for. They seem to operate under the assumption that their financial needs and life circumstances are always going to stay the same. The difference in requirements between a young couple with a baby, and an older family can be vast. It pays to review your cover regularly for this reason alone.
Leaving it Late:
There is a big difference between applying for life insurance at an earlier age. By age 50 you may have to pay much higher premiums. It’s best not to delay, especially as the time when a policy can potentially be most use is when families are young, and income may not be as high.
Life insurance can be a vital safety net for families. It is worth considering the consequences of not being adequately covered at your death. As always, I am happy to review your specific circumstances so get in touch if you need some advice.