Life Insurance – Do’s & Don’ts
When a loved one dies, the loss and turmoil experienced is traumatic enough but when the practicalities kick in, this loss can be compounded by the potential loss in income. Main breadwinner or stay at home parent, the financial implications can be huge.
Statistics show that sadly one in 29 children will lose a parent, therefore a top financial planning priority should be making sure your dependants are provided for should something happen to you; life cover can provide an affordable solution.
Finding the right policy for you and your family
A main consideration should be the level of cover you require. When deciding this make sure that all of your main debts, regular outgoings and potential future costs are covered, including your mortgage, outstanding loans, credit card debts or education fees for example. Life cover protection is generally recommended to provide 10 times the main breadwinner’s income. This is paid tax-free, but is added to the deceased’s estate. If there are IHT implications the policy may be written in trust. The term should reflect the needs of your dependants; children will probably require financial protection until they leave fulltime education and a partner may need the cover to last until pensionable age.
Other tips include:
- Arrange a policy as soon as possible by taking out a policy when you’re younger the premiums are likely to be lower
- Make sure you do not conceal or falsify any facts as this could lead to disputes at the time of a claim, e.g. be honest about your health and lifestyle
- Take advice to discover the relevance of joint or single cover to your circumstances
- Remember to review your policy regularly to see it is still relevant, it may require updating if your circumstances alter.
Keep it simple
With a variety of life cover products available, a straightforward level term life insurance policy – where a predecided lump sum is paid out on death (or under many policies on diagnosis of a terminal disease) within a stated period of time – is among the simplest and most affordable to arrange. Your adviser can help find an affordable policy for most circumstances.
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