Why Do I Need Life Insurance?

Life Insurance or some form of family protection is all about peace of mind. You want to be able to provide for your loved ones and dependents if you’re no longer able to do so. This could be to pay off a mortgage or other debts or simply to ensure that they are left with a sum to help with daily life and expenses. The amount of money paid out depends on the level of cover you buy. You decide how it’s paid out and whether it will cover specific payments. So, your personal circumstances are important to consider when you are deciding on a Life Insurance policy.

The main areas of cover that you may consider are:

• Standard Life Insurance
• Mortgage Cover
• Critical Illness Cover

You will also need to consider the ‘term’ of your policy. The term is the period of time it will run for, this may be 5 years, 20 years or the length of time you choose. The policy only pays out if you die during the term of the policy. There are three kinds of term life policies.

• Level – pays as a lump sum if you die within the agreed term. The level of cover stays the same throughout. This is the most simple and affordable option.
• Decreasing – the level of cover reduces each year. It’s designed to be used with repayment mortgages, where the outstanding loan decreases over time.
• Increasing – the level of cover rises over the term of the policy, to keep up with inflation.

How Much Life Insurance Do I Need?

As with every individual, the amount of insurance you purchase depends on many factors. Your goal is to buy enough life insurance coverage to provide a financial safety net for your family. You also want to avoid getting too much coverage. The amount of coverage varies from person to person, depending on where you are in your career, how much you earn and the types of debts and financial obligations you have. The most common reasons for life insurance are to cover:

Mortgage – For many of us, a mortgage is the biggest loan we’ll ever take out, so it’s worth considering how your family would afford the repayments should you die.

Debt – A mortgage may not be the only outstanding debt you have. If you owe money on other loans and credit cards, these will also need to be paid from your estate should you die. Include these extra debts in your calculations.

Expenses – Think carefully about other outgoings that your family might struggle to pay for if you were no longer around. They might need to cover food bills and utility bills, as well as the cost of running a car.

Income – Another way of working out how much life insurance you need is to multiply your salary by the number of years you need to keep earning.

Education – If you have children, factor in their education and how much it might cost to put them through school, higher education, and even further education.

Funeral Costs – Consider the costs of a funeral and allocate this amount to the lump sum.

Ultimately, getting life insurance is about trying to make sure the things that are important to you will be paid for or protected after you die.

So, how do we decide on the BEST Life Insurance provider of 2021?

There are many well-known players in the life insurance market, but what’s important to remember is that everyone’s personal circumstances are different therefore their life insurance needs are different. That’s why it is almost impossible to say ‘this’ life insurance company is the best.

Often there is a view that the best life insurance company is the one that offers the most affordable policy, but it is about finding the best value for money based on your circumstances.

Consider the following tips when deciding on a provider that is suitable for you:

Payout Statistics:

The best life insurance companies are those that are going to be around to payout your lump sum should you die during your policy term.  Therefore, choosing a reputable company over a smaller unknown company is a good start. The rate of life insurance payout is generally quite high, higher than most people predict. The statistics below cover the payout rates for a list of our top UK insurance providers.

Most Cost Effective
Research shows that many people believe life insurance is out of reach financially, but it may not be as expensive as you think. Price will no doubt be a massive factor into your decision and may even determine which provider you choose.

The following prices are based on:
£300,000 of level life insurance cover for 25 years.

Life insurance premiums are based primarily on life expectancy. In general, the younger and healthier you are, the cheaper your premiums. Your smoking status is also a major factor when it comes to price. The table below shows the cost of life insurance for a smoker and non-smoker. The average increase in price is 182% for people that smoke.

The following prices are based on:
30-year-old, male or female office worker – £300,000 of level life insurance cover for 25 years.

Feature and Benefits:

Life insurance has been evolving over the years and now life insurance companies offer additional benefits to be used whilst you are still alive. Again, the best policy and/or provider for you would be the one that has the most benefits relevant to you.

One way to compare any insurance policy is to consider what features, benefits or exclusions they do or don’t have. The trouble with life insurance is that most policies come with similar (if not the same) set of features, so it can be tricky to tell them apart. This is one of the reasons people get stuck when trying to choose what to buy.

Below is a list of standard features offering by insurers:

Exclusions
• A life insurance exclusion is a situation or circumstance that prevents your beneficiaries from receiving your death benefit. Essentially, it means that certain causes of death are not covered by the policy. For example, most insurers will not cover you if you die by suicide within a year of taking out the policy.

Guaranteed premiums
• Guaranteed premiums means that the amount you pay each month will remain the same throughout the policy term.

Guaranteed insurability
• This feature lets you increase the coverage on your life insurance policy without taking another medical exam. This usually covers major life events like getting married, divorced, taking out a mortgage, a significant pay rise and other life changing circumstances.

Waiver of premium
• Waiver of premium  means you don’t have to pay your monthly life insurance premiums if you’re off work for medical reasons for a certain period of time. This can really help out if you are struggling financially.

Terminal illness benefit
• Having terminal illness benefit means your insurer will pay out your lump sum early if you get a terminal diagnosis. For most insurers, this means a doctor saying you have a year or less to live.

Considering the benefits that each insurer offers may help you decide on your provider. Most offer a similar support package so it is important to understand each one and always check any documentation. You may find that a particular support service matches your needs, below is a list of general extra benefits that insures offer:

• Dedicated support from a nurse after being diagnosed with a serious illness
• 24 / 7 remote GP service
• A second medical opinion to discuss the diagnosis or treatment options if you (or your child, if you’ve added child cover) develop a serious illness
• Return-to-work support
• Discounts on health and fitness club membership
• Special Features for NHS Medical Professionals
• Assistance with debt and money management
• Access to an online health assessment which includes health metrics such as your BMI and cardiovascular risk profile
• Support in finding a solicitor to handle probate
• Bereavement counselling including child bereavement
• Therapies to ease the consequences of treatments
• Help to draw up a power of attorney
• Speech therapy

Many of the benefits and differences in policies are difficult for the layman to understand and are often hidden in documentation. Ensure you do some research.

Often the provider that has been rated on comparison websites may not be right for you. It may be that you have a medical issue, or you may decide a certain feature or benefits suits your needs. Therefore, it is worth while talking to an adviser about your needs.

At lizzie’s Life we can help find the right insurance by understanding your current circumstances, calculating your needs, and finding the right products based on their suitability.

We have a team of advisers to hand, book your appointment online and if you prefer, use our online quote system as a starting point.

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