Christmas is one of the few times of the year when families spend time together.
It also makes you realise how precious your family is and makes it all the more important to think about the future.
At Continuum we believe that life insurance is one of the best ways to protect your family’s finances – but we also know that it’s easy to pay £1,000s more than you need to over the life of the policy.
So, as part of our commitment to help you make the financial plans you need for the new year, we are looking at life insurance and on getting the deal you need.
What protection does your family need?
Most of us already have life assurance to provide a cash lump sum for our families if we died. It is a condition of many mortgages, and it should mean that your mortgage would be paid off. However, this might not be enough to let your family keep their home. There are bills to pay.
If your monthly income was to stop coming in, they would need to have enough to take care of the costs of living, from food to council tax?
As well as paying off the big cost – your home loan – you need to provide an income if you were no longer there to provide it yourself. This is something every parent, partner, or anyone with any other type of dependant needs to consider.
So, what level of cover do you need? How much do you really spend now? The growing cost of living means that a lump sum that seemed more than generous 10 or 20 years ago can seem much less adequate now. Think carefully about how much your family needs each month to get by.
The right kind of life cover.
There are actually many different types of life insurance. Some policies purely to cover a mortgage. Others are designed to mitigate inheritance tax – but the type you can’t afford to be without will provide money for your family if you or your partner were to die.
The key product for this is called ‘level term’ life insurance. Level term life insurance pays out a set amount if you die within a fixed term. So, you can arrange cover for the next 20 or 30 years and know exactly what you will have to pay each month, and how much the policy would pay out if you die within that period.
The younger you are when you start, the less cover can cost. Obviously, the more cover you get and the longer the term you want, the more it costs. Many people plan to provide cover while they are working and while their children are in education. With a pension coming in and children joining the world of work and capable of supporting themselves, they consider the need for insurance may be over.
However, with this kind of insurance there is a risk of being underinsured. Inflation is eating away at the real value of money, and the generous payment that you arranged 30 years ago, might not seem quite so generous now.
An increasing term life insurance could offer the solution. Your insurance premiums will go up over time – but so will the cover you enjoy and the level of payment you could secure.
A whole of life cover may be much more expensive – but there is no time limit on your cover. It will pay out when you die, however old you may be. It can be particularly useful to deal with Inheritance Tax issues.
What are the costs?
Whatever type of cover you decide on the cost will vary based on many factors. How much cover you need is one factor? A policy that offers millions of cover will cost more than one designed to deliver half that.
Your age is probably the next most important factor. The risks to your health and of early death are obviously higher in your 50s and 60s than in your 20s. Your health and your profession will influence premiums.
Some insurers will offer more attractive rates than others, and some may be more suitable for certain types of customers.
It can all start to look a little complicated, which is why getting expert help can be essential.
At Continuum, we can discuss the kind of cover you need to fit your family circumstances, and help you integrate your life insurance into an all-round financial safety net.
So, look at your family, and think about whether they have the financial security they deserve. Then call us at Continuum to provide it.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Estate planning is not regulated by the Financial Conduct Authority.
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