Life Insurance

Does the Queen still send out congratulatory telegrams when someone celebrates their 100th birthday?

Life assurance is absolutely essential

Of course, reaching treble figures is not such a big deal any more. Improvements in health and medical care mean that, on average, we are all tending to live longer. But this is an average, and most of us will probably have first hand experience of a tragic situation where someone has died in early middle age, leaving a young family behind.

Life assurance is absolutely essential where there are dependents who will suffer financially should we die. Unfortunately, the need for it comes at just the time when you can least afford it, and therefore tends to get overlooked.

New additions to the family mean a mass of new expenses. You are probably still getting the family home kitted out and at the start of your career, so not earning top wages. Next summer's holiday and saving for a family car are likely to be higher on the list of priorities.

Good news-basic life assurance cover is incredibly cheap

The good news however, is that basic life assurance cover is incredibly cheap and, because of improvements in health, has actually been getting cheaper.

Term assurance goes back to the dawn of the life assurance industry. For a monthly, or annual premium, you get a set level of insurance cover for a fixed period. If you die within the specified term, the policy pays out. If you survive until the end of the term it doesn't. Term assurance provides high protection at low cost. A 30 year old male, for example, can get £100,000 of life cover for 20 years, for less than 50p per day. Women's rates are even lower.

Terms can be selected to suit the circumstances. A 20 year term assurance could be taken out on the birth of a child to provide cover for their education. The amount of cover will also reflect individual circumstances – number of children, outstanding debt etc.

Do not overlook your spouse

And, while cover for the main breadwinner is particularly important, the other spouse or partner should not be overlooked. Finding someone to perform the traditional 'wife and mother' roles while the breadwinner goes to work costs money.

Term assurance is the basic type of cover, but there are variations. Family Income Benefit pays out a regular income rather than a cash lump sum and could be more appropriate for those who might feel overwhelmed by a massive cheque.

Policy holder can convert into an insurance based savings plan

Other forms of term assurance allow the policyholder to convert into an insurance based savings plan (convertible), increase the sum assured (increasable) or to renew the policy for a further term (renewable). Most term assurance policies will give cover up to £250,000 or even £500,000 without the need for a full medical: a few health questions on the proposal form is all that is usually required.

While many people in the UK are underinsured, most are likely to have some sort of life cover. Sadly, as a result, many families may actually be better off financially if the breadwinner dies, than if they become seriously sick or disabled.

Especially for the self employed, where there is no employer to help out in the first three or six months, some form of assurance to cover this sort of situation is well worth thinking about.

Permanent Health Insurance (PHI) policies – sometimes called income replacement policies – provide up to one half of an individual's income when the policyholder is prevented from working. Critical Illness Cover (CIC), pays out a lump sum or income following the diagnosis of a serious illness such as cancer or a stroke.

PHI & CIC

While PHI and CIC are seen as complementary rather than competing products, the relatively high premium rates (because of the higher risks involved) mean that few people can afford both. PHI is seen as the more comprehensive cover, although CIC has proved very popular because it is easier to relate to and the option of a lump sum payout is attractive.

Facing up to death or disability is difficult enough without having additional financial problems to deal with. The state cannot be relied upon to help in this situation so it is down to the individual to protect their loved ones.

An independent financial Advisor can review your circumstances and find the plans to suit you.

“Facing up to death or disability is difficult enough without having additional financial problems to deal with”

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