One of the first questions you should ask yourself when deciding if to take any form of life insurance is very simple “Will someone in my life be financially effected if I die?”. If the answer is yes – then you should be considering these insurances very seriously. Albeit not compulsory when taking out a mortgage – due to the size of the mortgage debt, have a think about just a few of the possibilities below;
I doubt it would be your family’s first choice to sell the family home in the event of your untimely death, yet the mortgage payments will still need to be paid. By having a life insurance policy, this would pay out the sum assured that you have selected (this tends to coincide with the outstanding balance of your mortgage) to your family thus allowing them to repay the mortgage and keep the family home.
Serious Illness (also known as Critical Illness)
Surprisingly, its serious illness that can be your biggest risk. Before the age of 65 you could be more likely to develop cancer or suffer from a life changing illness such as heart attack or stroke. With medical science becoming more advanced every day, recoveries and treatments for these illnesses are becoming more available to you and there is a high chance post treatment that you go on to lead a long and prosperous lifestyle. But what happens during your recovery and recuperation time? You wouldn’t be able to work which could have an effect on paying the daily living costs and mortgage payments. Serious Illness cover pays a lump sum payment in the event of the diagnosis of a specified critical illness. This can be used to clear the mortgage and give you and your family sense of financial relief.
You have probably heard of Statutory Sick Pay – this is paid by your employer in the same way as your normal wages and Tax and NI is deducted the normal way. Potentially you can get £94.25 per week for 28 weeks. Given monthly living costs like mortgage, bills, food – SSP isn’t going to stretch very far. Income protection (sometimes known as permanent health insurance) provides a regular monthly payment in the event of being unable to work due to incapacity. This can coincide with the SSP or you can set your own deferment period for the policy to start. Income protection usually provides a monthly benefit of 60% of the basic monthly wage and continues to pay until you are ready to go back to work or until the end of the policy.
As with any of these insurance policies, we would always recommend placing them in trust – this simply means if a policy is in trust upon your death, the policy is paid out a lot quicker and won’t be frozen like your other assets. It will be paid to who you have nominated in order for the mortgage to be cleared quicker. Trusts should form part of your Will and Estate Planning – without a Will, you will die intestate, this means should you die without a will, your estate could be left to those you had no intention of leaving it to. In addition to this, if you have children – who will look after them? These are not questions we like to answer, however, the importance of having this in place can be life changing to your family.
Benjamin Franklin once said “Nothing can be said to be certain, except death and taxes” and whilst this is true, you can prepare for these and insure either have a minimal impact on those around you.
We can tailor make your requirements to suit your circumstances. Please contact us to have a chat with a Financial Adviser on 0333 772 0672 or email us with your enquiry: firstname.lastname@example.org.
All initial consultations are at no cost with no obligation and we are always happy to help.