Mark Mullaney, Head of Partnerships & Distribution, Beagle Street explores who should get life insurance and why.
If you don’t currently have life insurance, guess what? You’re not alone. Across the UK, approximately £433bn of mortgage debt is not currently covered by life insurance policies. Put in simple terms, that’s an awful lot of households at risk should the worst happen.
We can all imagine a scenario where savings rapidly deplete, bills pile up, or worse still, families are forced to downsize or are made homeless as they cease to be able to make monthly payments.
Ironically, the age group where the impact of a premature, uninsured death can be most devastating – families with young children – is often the least costly to insure. In fact, typically, a young person with a family can expect to obtain life cover of £200,000 for around £10/month*. This is equivalent to a couple of cups of coffee or foregoing one visit to a soft play centre – perhaps a place we’d all be grateful to avoid, at least for one weekend!
Essentially, life insurance exists to look after our loved ones in the event of an untimely death. Many of us first think about it after having children of our own, as we want to make sure they are provided for in the future.
When it comes to picking the right product there are some choices to make, like whether you want to include critical illness cover, and what level of payout you’d be looking for. Deciding how long you want your insurance to last for, and whether you’re looking for payments to stay the same over time is one part of the decision process. You might want to go for payments that get smaller over time as you pay off more of your mortgage. At Beagle Street our quick quote calculator can help to give an idea of what monthly payments might be, before you even speak to an adviser.
Let’s start with who doesn’t need life insurance – that’s any of you out there without dependents, or whose dependents can now look after themselves. But for most working dads, that time hasn’t yet come.
The notion of just insuring a single life in the family doesn’t make so much sense these days. In particular, the idea of men being the principal family breadwinner has changed radically in recent decades. Ensuring both lives are covered by adequate insurance in today’s typical household is essential when we consider that almost three-quarters (73.9%) of couple families have both parents in employment.
However, in households where one partner is the stay-at-home parent it’s definitely still worth considering the types of costs that might mount up should that partner’s contributions to the household be taken out of the picture. Even a ‘back of the envelope’ totting up could see the costs for covering the jobs of cleaner, counsellor, childminder, launderette, chef and chauffeur that are encompassed into that one role equaling tens of thousands of pounds per annum. Clearly, then, insuring just one life in a couple would substantially fail to cover the risk of premature death and its consequent financial impact.
The thought of being old enough and wise enough to need life insurance is definitely daunting. But surely the alternative is far worse? If you’re still sitting on the fence, our team is happy to answer any questions, or you could take a look at some of our online guides which cover the differences in insurance for young people, divorced parents, the self-employed, smokers, and more, to seek out what’s best for you.
* a 40-year-old non-smoker, £200k decreasing term cover for 20 years