Life Insurance
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Life Insurance
Lee Gathercole and Neezam Romjon talk all about life insurance.
What is life insurance and why do we need it?
It’s easy to over complicate life insurance. I think that’s because there are opportunities to cover many different needs for different people. But in a nutshell, life insurance is a policy that pays a cash lump sum upon your death. It’s not necessarily for you – it’s to financially protect an asset or your family in the event of your death.
Is life insurance worth getting?
If you have an asset that you want to protect or family to look after, then life insurance is really key. More specifically, if you’ve got a mortgage debt and have a family or a partner, you definitely need life insurance. It means that if something happens to you, you’re not leaving your partner and family with that mortgage debt.
Generally the cost is very little um, so if you’ve got children and a partner then it’s something you really need to consider.
Am I eligible to apply for life insurance?
Everyone’s different – we’re all different heights, weights, some of us are smokers, some of us aren’t. Some of us are healthy, some of us aren’t… so the best way to find out if you’re eligible for life insurance is to speak with an advisor or apply to a provider directly.
They’ll go through medical underwriting questions with you. For life insurance these are quite straightforward. There will be questions around your height and weight, how much you drink, whether you smoke and also if you’ve ever been diagnosed with a medical condition.
Don’t be afraid to answer ‘yes’ to any questions and be honest. It’s important that you’re upfront. It doesn’t mean they won’t cover you, it just might mean they need to understand a bit more. That might just mean a few questions or getting a report from your GP. The provider will cover any costs for that.
A bit like when you’re applying for a mortgage, every provider is different. Some providers are happy to be flexible or cover certain conditions, whereas other mainstream insurers are looking for those with fewer health conditions and lower risks.
How much life insurance do I need and how long should I get life insurance for?
There’s no one figure for everyone. It depends on the individual as to how much cover you need and how long you should get life insurance for. If we’re talking specifically about mortgages, then obviously you would need life insurance to cover your mortgage balance.
If anything were to happen to you the insurance would pay the mortgage off for your partner. If you have a 25 year mortgage you might want to set that cover up for 25 years.
It’s a good idea to focus on the specifics within your life. You might decide to have life insurance up until your youngest child is 18 years old, for example.
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How much should I budget for life insurance?
I did a little bit of research before this podcast and I googled life insurance. I lost count of the number of different websites that came up: so many insurers and comparison websites – I could have scrolled for hours.
The honest answer about budget is it depends on how much cover you want and for how long. As an example, a 10 year life insurance policy will be a lot cheaper than a 30 year term, simply because you’re less likely to die in 10 years than within 30 years.
It also depends how old you are when you apply, your age when the policy ends and those adverse health conditions that we talked about. It also depends on the provider. Some will offer cheaper policies than others, but some insurance will include additional benefits and add-ons.
It also depends on whether you’re looking at guaranteed premiums or increasing or reviewable premiums – where basically your premium is going to change every year. The cover we recommend to most of our clients is generally on a guaranteed premium basis. So it might cost you more today compared with what you can get elsewhere, but that premium won’t increase over the course of 20 or 30 years.
A reviewable premium may be cheaper now, but it will keep going up. So our job is to weigh up all those things and make sense of it for you to match how much you’re willing to spend.
How can a mortgage broker help with life insurance?
Most mortgage advisers are qualified in protection advice as well, so that’s something to make use of.
Life insurance advice can be an absolute minefield. We have clients calling up where they bought a policy online and thought they had a certain level of cover. It looked cheap and a great policy, it was a company they’d heard of… but it turns out they weren’t covered for the amount they thought or a certain medical issue. You can really get caught out online.
A mortgage broker or qualified mortgage protection advisor will spend time understanding and exploring your needs and matching them to the right policy.
Remember too that life cover is not for you. It’s for those left behind. So it’s really important to make sure you get it right. It’s not always about finding the cheapest – because that might not always be the most suitable for you.
Seeking advice and comparing different options will give you confidence in knowing if anything does happen to you, that it will pay out. That’s what this is all about.
Approved by The Openwork Partnership on Wednesday 22nd March 2023.
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