Sunday Mirror (Northern Ireland)
Plan now to ease blow of passing
Funds to meet debts will be comfort to loved ones
Insure your car? Insure your life!
I think the last couple of years with the pandemic and now the catastrophes happening in the Ukraine have really brought home how precious and fragile life can be.
Behind each death is a story, all too often of a family with money worries.
When death occurs, it’s not uncommon to uncover a financial picture that looks very different from what had been expected.
On top of the pain and sadness of losing a loved one, there is suddenly also a financial shock – loss of income and surprising debts.
Many people think they are adequately insured by having their mortgage covered in the event of their death. Yet too many of us don’t even go that far.
As a certified financial planner, a vital part of what I do is ensuring catastrophes, such as premature death, are considered now, so there is a plan in place before an eventuality may occur. Managing risk is an important part of that.
A way of transferring the risk away from your family unit to an insurance company is by buying life assurance. It doesn’t always have the best reputation but ask a widow or widower who benefited from it and they’ll tell you a different story. We insure our cars and our home; it’s a natural step to insure our lives.
If you have financial dependents, do them a favour and get insured
What should I insure?
Think about all your liabilities. Start with your mortgage but also consider other outstanding debts: overdraft, credit cards, loans, car finance and so on. Having funds to repay these debts, plus funeral expenses, is a real comfort to loved ones.
What insurance do I need?
Term assurance, which pays out if death occurs within a specified term, is the cheapest way to get protection. A mortgage protection plan could be used to cover your mortgage and a separate term assurance plan for your other liabilities.
After that, to cover a loss of income, I like family income benefit plans. This is a term-assurance policy that pays out a tax-free monthly amount for the remainder of the policy term.
To work out how much you would need, deduct the payments on the mortgage and other debts you have, and calculate how much more you need for day-to-day living.
You can arrange a family income benefit plan for this amount, to go with your separate cover for the mortgage and other liabilities.
Together or separately?
For couples, arranging individual polices rather than a joint policy is slightly more expensive but you can personalise the cover amounts to suit each of your needs. You can also ensure the benefits are paid into a trust, which will speed up payment, meaning the funds can be available before probate is granted.
I appreciate life assurance isn’t exciting but leaving your loved ones heartbroken and in a financial mess isn’t great either. If you have financial dependents, do them a favour and get yourself insured.
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