If you own a house or a car, most of us will have insurance to cover against and damages, loss, contents or injury. This will cover yourself, a 3rd party, friends and loved ones. But how many of us think about insuring the most important people in our lives, or ourselves, in the event anything unexpected should happen to us? What would your partner do if they were suddenly left alone with the mortgage and bills to pay, if you were not around to help support financially?
Most people don’t like to think about tragedy, but if the last 2 months has taught us anything, then it’s not to take anything for granted. In this blog we have covered off some of the most frequently asked questions we receive on life insurance, to assist you with deciding if this type of cover might be appropriate for you.
What is Life Insurance?
Life (assurance) will pay out money as a lump sum or as regular payments in the event you were die. You can choose who receives these payments. It is designed to provide your dependants with the reassurance that there are provisions if you are no longer there. The amount of money paid out depends on the level of cover you buy. There are different reasons why you might take out life insurance and below are just a few:
- Children – a life insurance policy could provide an income for your family while they’re growing up if you are no longer around to provide for them.
- Remain in your home – a life insurance pay-out could allow your partner or family to remain in their home in the event of your death.
- Leave a legacy – a policy could provide your surviving relatives with an inheritance when you die.
- Funeral costs – an insurance pay-out could provide your family with a lump sum to assist with funeral costs.
Different types of Life Insurance
There are three main types of life insurance to consider:
- Level Term Assurance: pays out a lump sum if you die within the specified term. The amount you’re covered for remains level throughout the term.
- Decreasing Term Assurance: the amount you’re covered for decreases over the term of the policy. These policies are often used to cover a debt that reduces over time, such as a repayment mortgage as they will run hand in hand. This is the most common.
- Increasing Term Assurance: the amount you’re covered for increases over the term of the policy, to keep up with inflation so that your family can make the most of the payment.
Should you cover your partner too?
You can have a joint or singular life cover policy. Your circumstances will depend on which is right for you and your partner.
- Joint life insurance – normally pays out in the event of 1 person’s death and then the policy ends, although you can cover both deaths with some policies.
- Separate life insurance – this usually pays out when either partner dies which offers a higher level of protection, although this option may be more expensive.
How much does it cost?
Your health, whether you smoke, the type of cover and amount of cover you require, all impact your monthly / yearly premium. Contact us today for a personal quotation.
How much cover should you take out?
The more protection your life insurance policy offers, the higher your premium will be.
If you’re looking to just cover the cost of your mortgage, working out how much cover you need should be straightforward. If you would like to ensure your family are provided with a regular income after your death, you should look at your current outgoings and think about possible future costs to work out an accurate figure, that they would need.
Should you write your Life Insurance in Trust?
Writing a Life policy in trust would mean that any pay-out could be received faster, with less hassle. It would also be separate to your estate for inheritance tax purposes. Advice should always be taken as to whether a trust is right for you. An existing policy can also be placed in to trust. Speak to us to discuss whether a life cover trust would be suitable for you.
Reviewing your Life Insurance?
You should regularly review your Life policy as your circumstances can change.
If you increased / decreased your mortgage (and your policy runs alongside) make sure your covered amount reflects this.
If you have had a family since taking out the policy, you may need to think about childcare costs what income they may require.
Life Assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.
Get in touch
No one likes to think about the death of a loved one, however, it is one less burden for the family to carry if there is a financial plan in place. Contact us and we will be happy to have a discussion on your life cover arrangements.