I regularly get asked this question by clients and I’m often told; I’m young fit and healthy, it costs too much, I have death in service or a variety of other reasons why it’s not needed. Some valid points are raised, some not so! Often I’ll draw this diagram. (You might see why I failed GCSE Art!)
I’ll ask them to label the picture and rank them in order of importance, and more often than not this is the answer:
If I ask; What’s already protected? Almost always it’s the car and contents insurance but not always life/family and rarely income. So, we choose to insure the two least important elements but neglect what most important to us. In this week’s blog, I will focus on life cover and follow it up in the next instalment by discussing income protection and critical illness cover.
If you or your partner died what would be the effect financially on your family? How long would savings last, would they be able to pay the mortgage, the bills etc? If the answer is no, then the need for cover is there.
Life cover is relatively easy understand- it pays out to dependent/surviving partner or nominated beneficiary if you die during the term of the plan, either as lump sum or a regular income. It can decrease over time in line with a mortgage, stay level or even increase it all depends on what you need.
You might already have it and if so it is still a good idea to review it regularly to make sure it’s doing what it was set up to do. Is it written into a trust? A simple procedure that keeps it outside of your estate, allows you to name beneficiaries and can speed the time it takes to get to the people that will need it.
How much cover do I need?
There are no hard and fast answers to this question – it depends on individual circumstances and budget. It could be that covering the mortgage will be sufficient. But not always- if your partner had no mortgage but the household lost your income would they cope?
It can be an equally important consideration for non-homeowners too. We have been labelled as Generation Rent, and the age at which we buy our first house is rising. If you already have a family but live in rented accommodation you might never have sat down with an advisor to discuss life cover but the exact same questions and needs outlined above still apply.
These are difficult conversations to have with loved ones and it’s easy to bury your head in the sand or put off dealing with it till tomorrow but it’s a conversation we all need to have. If you already have a mortgage or financial advisor, then ask them to review your cover if they haven’t already. If you don’t then ask friends or family or other Mumblers for a recommendation. There are several advisors who are regularly recommended on the Facebook page and there’s no better advert than a happy customer. I am of course more than happy to arrange a meeting to discuss this with any members of the group and would never charge a fee to review or make a recommendation if needed.
In the interest of a balanced take on the need for cover it is true that you don’t need this cover if you know you’ll live a long and healthy life. In the next blog I’ll talk about income protection and critical illness cover For more information contact me, Stewart Amos, M: 07810 108 165, E: email@example.com, W: www.2plan.com/
Stewart Amos, Mortgage & Protection Consultant
Stewart is a mortgage advisor based in the centre of Harrogate. He advises on and arranges mortgages from a comprehensive range of mortgages from across the market for all sorts of clients. From those looking to take their first steps on the property ladder to those with a portfolio of investment properties. He also helps arrange the cover put in place to ensure families would be financially secure should the very worst happen; life insurance, critical illness cover etc.