Of course, nobody wants to think about dying or becoming seriously ill, but let’s face it, many of us will need life or income protection insurance to a greater or lesser degree during our lives, to help cover the cost of repaying our mortgages and expenses such as funeral costs if anything should happen to us.
There are two main reasons for arranging life insurance; to cover a debt or liability, especially a mortgage; or to replace the income that you bring in to your family whilst you are working. For example, if your partner were to die, could you afford to give up work to care for your children? How would you cope financially with the resulting fall in income? A simple life insurance policy could help cover the cost of hiring a nanny or housekeeper while your children are young, and the cost can be surprisingly cheap.
As Financial Planners, we often hear people say “It’s OK. I’ve got life cover with my job.” We know it’s fairly common for employers to offer death in service benefits of around three times basic salary as a lump sum death benefit, but what happens if circumstances change?
One example of this is that many people take advantage of flexible working arrangements to take a career break of up to a year to travel or take on charity work. What they don’t realise is that it’s likely that their staff benefits will stop when their salary does.
While they may have saved to cover their regular expenses during their career break, they don’t realise that their mortgage might not be repaid in the event that something tragic occurs, potentially leaving their loved ones in financial difficulties.
And is a payment of, say, 3 times your salary anywhere enough to replace the income that would disappear on your death? If you've got young children to care for, you might be supporting them for 20 years or more. You need to do the calculations to work out how much cover you need, and then put proper plans in place. A skilled Financial Planner can help you with this.
Similarly, how many of us would be prepared if we were to have an accident or become ill and couldn’t work for an indefinite period? While we hope this never happens, the financial impact if such an event were to occur would be enormous.
Buying a home. Getting married. Having a baby. Changing jobs. Protecting against Inheritance Tax. These are all events in life where it makes sense to consider what protection you already have and what additional cover you might need.
To help meet your family’s protection needs there are several options available:
Term Insurance - designed to cover you for a specific period, for example whilst your children are growing up or for the duration of your mortgage;
Family Income Benefit - pays a yearly sum to replace your income on death;
Income Protection - will give you an income if you become ill or disabled;
Whole of Life Assurance - provides permanent cover for total reassurance.
These are just some of the options. As part of a robust financial planning strategy, Chesterton House can help you determine what protection needs you have, compare the cost of the various options available, and prioritise your requirements within your budget. Regularly reviewing your protection plans and updating your strategy, we will help you achieve the peace of mind that comes from knowing that you and your family are financially secure, both now and in the future.
We can work with you to get this right, whether this is your only need for advice, part of a wider mortgage review, or a component of a bespoke Financial Plan. If you need advice in this area, or know someone who does, you can contact us here.
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