Covering more than your back

WE all spend a lot of money on insurances – car, house, pet, dental … the list goes on.

But the most important of all, ourselves, is often neglected.

Obtaining life cover is cheap and simple yet so many don’t bother.

Perhaps they find it too morbid. Perhaps they consider dying young is such a remote possibility that they are prepared to take their chances.

Yet, we’ve recently dealt with a number of deaths of relatively young people who still had commitments and dependents.

This brings home how important life cover really is.

It’s easy to get wrapped up in the more sophisticated areas of financial planning but this is a fundamental – making sure that if we’re not around, those left behind are able to function financially.

Not everyone needs life insurance. For example, if you’re single or your partner earns enough for your family to live on.

But if your children, partner or other relatives depend on your income to cover the mortgage or other living expenses, then the answer is yes.

According to Finder.com 11.1 million households in the UK have mortgages but 42 per cent of people with a mortgage have no life insurance.

That’s a worrying statistic.

It’s awful enough for a family to deal with the loss of a loved one but if that then causes severe financial difficulties, then everything is so much worse.

Martin Lewis, of MoneySavingExpert.com, noted: “All parents want to see their children grow up and flourish.

“The thought of not being there, and the impact that would have on them, is almost too unpleasant to bear. Yet I want you to imagine it. One in 29 children – a typical class size – lose a parent before they grow up. I was one. And on top of the horrendous destructive grief, as prosaic as it sounds, there are often serious financial considerations too.”

To be fair, many people have death-in-service benefits with their job but that shouldn’t be completely relied upon. If you change job or are made redundant, the cover disappears. It always makes sense to have a core level of personal cover.

Thankfully, most do not die young and that means the cost of life cover is usually very reasonable.

There are two main types. Term life insurance policies run for a fixed period such as five, ten or 25 years. A whole-of-life policy will pay out no matter when you die.

For a 40-year-old non-smoker, £250,000 cover that lasts for 25 years, premiums guaranteed never to increase – normally costs less than £20 per month. The actual price you pay depends on a number of things including your age, your health, your lifestyle, whether you smoke, the length of the policy and the amount of money you want covered.

A rule of thumb is to cover 10 times the main breadwinner’s income.

But shop around.

Mr Lewis cautions: “Beware going direct to an insurer. It’s a competitive market, you need to ensure you’re finding the cheapest.

“Even comparison sites can be over-expensive. They may find you the cheapest policy, but they usually also take a huge whack of commission from the insurer.”

On the surface, life insurance is a straightforward product that can easily be bought online.

However, a consultation with an independent financial adviser is worth considering.

They can ensure that the cover is best structured to meet your personal circumstances and requirements, can advise on the benefits of holding cover in trust and can use their expertise to make sure you are getting a good deal.

That way hopefully you will have peace of mind that all is secure. Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners,

based in Solihull. Email: tlaw@eastcotewealth.co.uk

The views expressed in this article should not be construed as financial advice