Death. It’s never a nice topic to think about, let alone talk about.
But we all die, and while we hope that it’s at a ripe old age after a life well-lived, unfortunately that isn’t always the case.
It’s so important to ensure that you are adequately insured to protect your family if you die prematurely, because if you’re not, then the effect can be catastrophic on those you leave behind.
After all, we readily take out home insurance, car insurance and pet insurance….so surely human insurance should be top of the priority list.
As with all insurance, the cost of the policy will differ based on your individual circumstances. For example, a younger person will get cheaper rates than an older person. Someone with a history of ill health may have to pay a higher premium compared to someone in perfect health (or may get refused outright or have certain illnesses excluded).
Getting the right cover in place
When we engage with new clients, we undertake a comprehensive review of their existing life cover when we’re creating our financial planning strategy.
Often, new clients will have a collection of life policies which have been taken out at various times, for reasons that either they can’t remember, or are no longer relevant.
When asked what a certain policy is for, its not unusual to hear that it was to cover their first mortgage, on a house they sold 20 years ago! Meanwhile, their current mortgage (which is considerably higher) may be unprotected.
So it’s really important to make sure that your life cover matches your liabilities and family situation. It may be that, taken as a whole, the life insurance you have in place is sufficient to cover off your liabilities. But it is possible that the payout amounts, and the term over which they run, are not appropriate for your current situation.
We always match a life policy with a purpose. Sometimes we can use a couple of different policies to do this (as a basic example, if you are a single person and have two separate policies, each with a sum assured of £100,000, and a £200,000 mortgage, then we can agree that the pay out of these two policies would repay the mortgage), but again the term of these individual policies may not match the outstanding term on your mortgage.
The main things to consider when assessing your current protection policies are:
1) What is this policy for?
2) Does the term of the policy match the term of the liability (or your family situation)?
3) Is the sum assured enough to cover off the purpose?
4) Looking at your various policies as a whole, is there sufficient cover in place, and over a suitable term, to cover everything you need/want to cover?
If the answer to the last three questions is ‘no’, then you should seek advice about how to create a life cover strategy to protect your family and your assets.
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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. You should review the level of cover required on a regular basis to ensure that it keeps in line with your earnings, otherwise, cover may be less than you need. If any relevant information provided, when applying, is not disclosed accurately and honestly, this could result in any cover offered becoming invalid and / or may result in the non-payment of any future claims.
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