Life Insurance the Must have policy for Families

263 billion life insurance black hole as British breadwinners go without cover

Last year I became a father at age 45,and it is without doubt the greatest thing to happen in my life for many years, as any parent reading this will know it is a time of great joy as well as some deep reflection. From my own point of view I have begun to look at what I need to do as a father to ensure both my daughter and partner are well looked after, as the main income earner in the family I have a responsibility to ensure that we have all we need from a monetary point of view as well as providing emotional support and the love and care of a doting dad.

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As it stands we are in a very good position, I work in a good job and my partner has the opportunity to resume her career once the maternity leave is completed, but is something were to happen to me or my partner or even both of us, where would that leave my daughter and partner?

A report out today from the people at MoneySupermarket.com suggests that as many as 8.5 million bread winners in the UK have no form of life insurance, With the average life insurance pay-out over £31,000, this equates to a £263 billion black hole in life insurance provision for the dependents of those breadwinners who do not have a policy in place.

The insight found 12 million of the nation’s breadwinners are women – of which two in five (38 per cent) have life insurance, compared to just under half (45 per cent) of males.

Kevin Pratt, insurance expert, MoneySuperMarket said: “Life insurance is there to help provide for your loved ones when they can no longer rely on your income, and while we all understand the necessity of having such a policy in place, it can be a delicate and difficult topic to address.  Anyone with a partner or children who are financially reliant on them should think about life insurance. Avoiding the matter can put loved ones at grave financial risk and it’s worrying to see how many breadwinners – male and female – are doing this.”

I have to say that at 7 am this morning I was one of those 8.5 million people, but at the time of writing this I am now covered, in the interest of playing fair I should point out that I used Confused.com to get my insurance quote, and in less than 15 minutes I was covered, I would suggest that if you don’t have life insurance that you check out either Confused.com or MoneySupermarket.com to find a good quote, for much less than a £1.00 a day most of us can get substantial cover to ensure our loved ones are left safe and secure should something terrible happen.

Life insurance Tips to know before you Buy cover:

  1. Make sure you have a will in place asap
  2. Before deciding how much cover to buy, look at what your family would need to get by, consider your mortgage balance, debts, living costs etc.
  3. Do not lie on your application to get a cheaper quote, if you smoke for example or have smoked tell the truth.
  4. Only commit to a premium you know you can afford, you can always buy more cover later once your finances improve, some cover is better than none at all.
  5. Regularly review your life insurance policy and amend it if your circumstances change. Examples could be the birth of a child, a change in occupation or an increase in your debt.
  6. Put your life insurance policy in trust. This ensures that any pay-outs made on your life insurance policy will not be subject to inheritance tax. You only need to fill in a few forms and it’s completely free. Your life insurer can guide you through this process.

The Don’ts:

  1. Don’t accept the rate offered by your mortgage lender. Often people ask if they need life insurance to get a mortgage. To get a mortgage you will usually need life insurance if your children or partner rely on your income to pay the mortgage; however mortgage lenders can offer overinflated prices. Get your life insurance policy separately and make sure you find the lowest price you can.
  2. Don’t forget to factor in future costs. When calculating how much life insurance you need, don’t forget to factor in your children’s school fees, potential university fees, home improvement costs etc. But try not to overestimate, as this can result in higher premiums.
  3. Don’t underestimate the value of a stay at home parent. Legal & General released a report revealing that replacing the work of a full time mum can cost upwards of £32,000 a year.
  4. Don’t buy joint life insurance if you don’t need to. It used to be the case that it was significantly cheaper to take out a joint life insurance policy with your partner. However in some cases this is no longer true, so it may be worth looking into two separate policies. This way, if one policyholder dies, the other policyholder can keep their policy. Effectively, this means that you get double the cover for your money.