Understanding life assurance can be confusing. With everyone having different needs and circumstances and so many different products and providers out there, it can feel like a minefield…However, it doesn’t have to be with the help of a good financial adviser and our short guide.Why should you consider Life Insurance?
Life insurance is fundamental to having a sound financial plan and it’s not as expensive as you may think. According to moneytothemasses.com a healthy 30 year old male (non smoker) requiring £100,000 of life cover, over a 20 year term can be as little as £5.08 per month. This is less than the price of a couple of take away coffees per month but gives you the peace of mind,knowing that your mortgage is paid off and your loved ones are protected.
If your loved ones depend on your financial support for their livelihood, life insurance should be an extremely important consideration for you. It can help to ease the potential financial strain on your family and maintain their standard of living, giving you peace of mind that they will be looked after if you were no longer here to do so.Types of cover
There are many different types of life insurance available to suit a range of different needs and circumstances. The most common are:Term Assurance Policies
- These types of policies run for a fixed period of time, known as the ‘term’ of your policy (such as 5, 10 or 25 years)
- They pay out a lump sum if you die during the policy term
- There is no lump sum payable at the end of the term
- You can choose from either ‘Level’ term, meaning the sum assured remains level (the same as when you took the policy out) throughout the term, or ‘Decreasing’term, meaning the sum decreases by a certain amount (based on a chosen percentage) each year
- Decreasing term assurance is commonly used to repay a mortgage in the event of death. It is usually cheaper than level term assurance (because it decreases in line with your mortgage) and for this reason, is also sometimes known as ‘mortgage protection’.
Family Income Benefit
- This type of plan pays either a lump sum or more commonly, a monthly income to help a spouse or guardian with living costs and other household expenditure
- Many people have a lump sum policy to repay their mortgage but forget that running a household (especially one with children!) can cost well in excess of the mortgage payment. A monthly income is essential in almost all homes
- The knowledge that your family can still afford their bills and maintain their current lifestyle in the event of your death can be invaluable
- The sum assured is usually level but some providers offer an option to increase it in line with RPI- so you don’t have to worry about inflation
- It’s a good idea for the term chosen to be in line with your youngest child becoming financially independent (usually when they turn 21)
Critical Illness Cover
- Pays out a lump in the event of you being diagnosed with a critical illness
- Can be used to cover household costs for a period of time, repay a mortgage or cover mortgage payments, relieving financial pressure and allowing you to focus on being treated and hopefully getting well
- There are many different providers offering cover for various different conditions so it’s important to be sure you check what you are being covered for as well as any exclusions that may apply
- Critical illness with term assurance is usually cheaper than stand-alone critical illness cover. Your adviser can discuss what is important to you and recommend cover accordingly
Trusts
It’s important that relevant policies are placed in trust. This ensures benefits are paid to the people you want and removes funds from your estate, helping to protect against potential inheritance tax liabilities.Applying for cover
A good Adviser will ensure they get a good understanding of your circumstances and finances so that you are offered a protection package that is tailored to your particular needs. They should ensure it is fit for purpose and competitive within the market. The application will include a series of questions about you, your health, family health history and lifestyle. An initial cost for premiums will be given on the quote, however it’s important to remember that certain factors can change the cost of cover dramatically. These can include:
- Your lifestyle/hobbies
- Job
- Smoking status
- Health issues
- Amount of cover
Reviewing your Protection
Once you have cover in place, it is a good idea to review it every couple of years (or at the time of a life event such as getting married, moving house, remortgaging or having a child) to check it is still meets your needs and to ensure the premiums you are paying are still competitive in the current market.How can we help?
Everystep Financial can help you with all your protection needs. We are fully qualified and regulated by the Financial Conduct Authority, fully insured, and promise never to sell you a policy that you don’t need. We want your premiums to be affordable for the long term, ensuring you and your family are protected when you need it most.
We have access to the whole of the market and a good understanding of different providers’ products and underwriting criteria, giving you the best chance of getting the right cover to suit your needs.
We receive commission direct from providers meaning we won’t charge you a fee for our protection services and are available to visit you at times convenient to you, in the comfort of your own home or in either of our offices in Weston-super-Mare or Hanham, Bristol.
Call us on 01934 550046 to book an initial free, no obligation appointment