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It's time to think about life insurance
21 October 2020
Why do you need life insurance?
If you have dependents – people who rely on you financially – then you should have life insurance. In fact, if you have dependents and don’t have life insurance, you are exposing them to grave financial risk. And who would want to do that?
Life insurance tends not to feature on ‘to do’ lists because it makes us confront uncomfortable questions, such as what would happen to our loved ones if we were to die unexpectedly in the next few years.
However, we all carry a deep responsibility to ensure those we leave behind at least have sufficient funds to carry on with life if we’re no longer around. That means putting plans in place to address unpleasant possibilities.
Types of life insurance
There are two main types of life insurance. The one most people need is ‘term’ insurance. This pays out if the policyholder dies within a stated period – the ‘term’.
The other type – ‘whole of life’ insurance – pays out on your death, whenever that occurs. This is more of an investment vehicle than a financial protection plan and is typically used for estate planning.
Dealing with debt
Term insurance pays out money that can be used to clear debts such as a mortgage, lifting a huge financial burden and enabling your loved ones to stay in the family home.
It can also provide for day-to-day living expenses – everything from groceries to utility bills, and from school and university fees to family holidays.
Key points
GET ENOUGH COVER
Buy sufficient insurance to take care of your family until the youngest is financially self-sufficient.
YOU BOTH NEED IT
If you’re in a couple, you both need cover, even if one of you stays at home. The proceeds can pay for services such as childcare and keeping up the house.
BUY SEPARATE POLICIES
Joint life insurance covers you both under one policy, but separate policies are more flexible and provide greater protection, although they cost a bit more.
WORK COVER ISN’T ENOUGH
Many firms offer ‘death in service’ life insurance. However, once you’ve worked out how much cover you need, you’ll probably realise this isn’t enough and you’ll need a policy of your own.
THE SOONER THE BETTER
The older you are, the more expensive life insurance is, so bite the bullet and buy young.
PUT YOUR POLICY ‘IN TRUST’
Doing so places the proceeds outside your estate so it can be paid to your beneficiaries without any delay associated with probate. It also keeps the money from the clutches of the tax man.
REVIEW REGULARLY
Monitor your life insurance coverage to make sure it keeps pace with your circumstances. Events such as marriage, the birth of children and moving home might prompt you to increase the amount of insurance you have.
It is important to take professional advice before making any decision relating to your personal finances.
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Contrary to costs such as legal fees, estate agency fees or Stamp Duty, having your new home surveyed isn’t actually compulsory. However, with a property being the most expensive thing most of us will ever buy, the price of not having it checked by a surveyor could be devastating. If you buy a property for the seller’s asking price and later find it has serious defects, it’s too late to back out of the purchase or renegotiate a price with your seller. You’re also likely to find yourself paying out to rectify the fault – and probably a lot more than you would have paid for a survey in the first place! A survey to suit your needs There isn’t just one type of survey available – you can get different ones that range in cost, according to the kind of property you’re buying: Condition report What is it: a basic overview of the property that only highlights the most significant defects; it doesn’t go into detail. Suitable for: those buying a relatively new homes in good condition. Homebuyer report What is it: a more comprehensive survey that highlights obvious defects such as damp or subsidence. It will include advice on any necessary repairs or maintenance and may also include a valuation or an estimation of rebuild costs. However, it’s not an intrusive survey, meaning the surveyor will only be picking up on visible issues. Suitable for: those buying a standard property in a reasonable condition. Building survey What is it: the most comprehensive type of survey, which looks at the property’s structure and condition, lists any defects and advises on repair and maintenance work. Unlike a homebuyer report, this is a much more hands-on survey, so the surveyor will do things like going up in the loft or looking under floorboards or behind sofas. Suitable for: older or listed buildings, or properties that are in poor condition or have an unusual design or structure. But what if I’m buying a new build? Even though it’s tempting not to have a new build property surveyed, there can still be issues with new build homes that could be costly to repair. If you’re buying a new build, you’ll need a slightly different survey called a snagging survey. It identifies any defects with new build homes, from cosmetic issues to structural problems, which the developer will then have to fix within the two-year warranty period. We can help As a member of Openwork, we can refer you to our specialist Surveying Service, which offers access to a large network of approved surveyors across the UK. For your peace of mind, get in touch. Surveying is not regulated by the Financial Conduct Authority.
Get to know your SVR
When you get a mortgage the lenders will want to do some checks to confirm you have the income to pay the new mortgage and they will ask for documents from you. We work out from the documents you give us which lenders will lend you the new mortgage. We understand what lenders are looking for so we can put you in the best position. Get in touch and we will be happy to help.
What will you do in retirement?
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We understand that from time to time our clients may find themselves dealing with circumstances that could mean they are potentially vulnerable. For example, a change in health, caring for a family member, or coping with the loss of a loved one. There are many different types of vulnerability, and what makes one person vulnerable might not affect someone else. When we are vulnerable, our need for financial advice may change. However, admitting vulnerability or seeking help can sometimes feel hard.
If this is something you would like to discuss with us, please ask for a copy of our support guide or download a copy here. This guide is designed to help explain vulnerability and the ways in which we might be able to support you. If you feel any of the circumstances in the brochure apply to you, please talk to us
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