When money is tight, paying out for insurance can seem like a waste and with life insurance there’s the added complication that none of us like to contemplate either our own premature death or that of a loved one. Perhaps that’s why, despite the possibility of suffering financial hardship without it, only 30% of British parents take out life insurance. It’s an important financial decision and there are a variety of options to consider.
Determine the amount of coverage you will need
There’s no precise way of doing this, but a few calculations will at least point you in the right direction. What are your long-term obligations? Subtract your assets from that figure and that will give you an indication of the gap you need to fill. Consider how many years of earning would need to be covered, mortgage, education, funeral expenses and remember that things are only going to get more expensive. So, the short answer is: buy as much life cover as you can afford.
Find the right policy for you
There’s a bewildering array of policies out there. Decreasing term cover will pay out smaller sums as the policy matures, level term cover will pay out a fixed sum throughout and increasing term cover will pay out increasingly larger sums. You will also want to consider if you and your partner want to take out single cover policies or a joint policy which pays out on the first death. This can be a slightly cheaper alternative but be aware that it would leave the survivor without cover and obtaining life insurance later in life is expensive because premiums increase with age. Another potential difficulty is that if the relationship breaks down, you may not be able to convert the policy into single cover. Use a comparison website to ensure that you are aware of your options.
The stay at home parent needs insurance too
Just because a parent isn’t earning doesn’t mean that they aren’t making a financial contribution to the family. Consider the cost of childcare and domestic work as part of your insurance.
Childcare and Education
It’s estimated that it costs somewhere in the region of £200,000 to raise a child from birth to twenty-one and much of these costs will be incurred as a result of childcare and education. At each stage of their development a child’s education provision will change and with these changes come attendant costs: transport, uniform, sports equipment, extra-curricular activities etc. The cost of university education is impossible to predict, but like everything else it’s likely to get more and more expensive.
Choosing your adult beneficiary
Usually this will be your partner, but it doesn’t have to be, it could be a parent, sibling or more than one person. You may wish to name a secondary beneficiary who would receive the payment if your first choice were unable to do so. Whatever your decision, make sure that the beneficiary is aware and that the contact details are accurate and updated.
Determine the amount of coverage you will need
There’s no precise way of doing this, but a few calculations will at least point you in the right direction. What are your long-term obligations? Subtract your assets from that figure and that will give you an indication of the gap you need to fill. Consider how many years of earning would need to be covered, mortgage, education, funeral expenses and remember that things are only going to get more expensive. So, the short answer is: buy as much life cover as you can afford.
Find the right policy for you
There’s a bewildering array of policies out there. Decreasing term cover will pay out smaller sums as the policy matures, level term cover will pay out a fixed sum throughout and increasing term cover will pay out increasingly larger sums. You will also want to consider if you and your partner want to take out single cover policies or a joint policy which pays out on the first death. This can be a slightly cheaper alternative but be aware that it would leave the survivor without cover and obtaining life insurance later in life is expensive because premiums increase with age. Another potential difficulty is that if the relationship breaks down, you may not be able to convert the policy into single cover. Use a comparison website to ensure that you are aware of your options.
The stay at home parent needs insurance too
Just because a parent isn’t earning doesn’t mean that they aren’t making a financial contribution to the family. Consider the cost of childcare and domestic work as part of your insurance.
Childcare and Education
It’s estimated that it costs somewhere in the region of £200,000 to raise a child from birth to twenty-one and much of these costs will be incurred as a result of childcare and education. At each stage of their development a child’s education provision will change and with these changes come attendant costs: transport, uniform, sports equipment, extra-curricular activities etc. The cost of university education is impossible to predict, but like everything else it’s likely to get more and more expensive.
Choosing your adult beneficiary
Usually this will be your partner, but it doesn’t have to be, it could be a parent, sibling or more than one person. You may wish to name a secondary beneficiary who would receive the payment if your first choice were unable to do so. Whatever your decision, make sure that the beneficiary is aware and that the contact details are accurate and updated.