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What is life insurance and why do we need it?
Someone asked us this question the other day. They said that actually life insurance should be called death insurance – and that’s very true. It’s easier to understand it that way. It is kind of a death insurance because it pays out when you die.
Why is life insurance important?
Let’s say a couple has bought their first house together and one of them were to die from an unforeseen illness or an accident. If they’d taken out enough life insurance, their mortgage would be paid off in full.
You might have a really big loan. Let’s say you’ve had a house extension or you’ve bought a new conservatory. You’ve taken out a big loan and you’re relying on two incomes to repay it. Your life insurance would repay that loan and potentially the mortgage as well.
What if I have pre-existing medical conditions?
We can work around that. We speak to the underwriters on a daily basis and different companies offer cover for different situations. If you have a pre-existing condition like diabetes, we know which insurance companies will potentially cover you, so we can work around it.
Is life insurance worth getting?
Definitely. If you’re a single person with no children, perhaps not so much. But generally most people will take life insurance. Even for single people who want to leave their home to a family member, it’s worth getting life insurance.
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How much life insurance do I need? How long should I get life insurance for?
It’s totally down to your circumstances. Everybody has a different need. It’s also about your monthly premiums. You could take out £500,000 worth of life cover if you wanted to leave that to your wife or your husband or your children. But you’ve got to work out how much your premiums are going to be.
As for how long to get life insurance for, a lot of people take it to run alongside the mortgage. If they take a 30 year mortgage, they take a 30 year life policy. Other people want their life insurance to keep running, in which case you can take out a whole-of-life policy to pay out when you die. Even if you live until you’re 99, a whole-of-life policy will pay out when you pass away.
How much should I budget for life insurance?
That’s like asking me ‘how long is a piece of string?’ It all depends. If you’re young and healthy, your insurance costs will be pretty low. As you get older, unfortunately your insurance premiums will start to go up because there’s more chance of something happening to you.
So the earlier you get your insurance started, the better. It still depends how much cover you take and how long you take it over. Speak to me and I will let you know the prices involved.
Can you go back and review your life insurance policy to update it or change anything?
Absolutely. We thoroughly recommend that. Circumstances change all the time and a lot of people take a policy out when they’re young and never review it. Then they forget what they’re covered for. A review every 12 months, two years or every four years is a good idea just to make sure it still covers what you need.
What else do we need to know about life insurance?
There’s more to consider with reviewing your policy. If you are a smoker when you take out your cover, for example, and then a couple of years later you’ve stopped, we can look at your insurance policy and see if your premiums will go down.
Your home may be repossessed if you do not keep up repayments on your mortgage.