Nobody enjoys thinking about the uncertainties life may hold, but it always pays to plan for the unexpected. It’s important to ensure your loved ones are looked after, no matter what happens. Life insurance is essential if you have a mortgage, and you may also need to consider income protection in case you’re unable to work, or cover that offers a payout if you are diagnosed with a serious illness.
There are many types of policy, each designed for different stages of life and varying circumstances, and if you’ve been researching life insurance you may feel overwhelmed and confused. It’s also quite likely that you’ve encountered a few common misconceptions about life insurance too. It’s important not to let these myths stop you from ensuring you’ve done everything you can to prepare for the unexpected and protect the people you love financially, which is why we’ve put together this blog post.
Myth: I’m too young to need life insurance
Although you need to be at least 18 in order to take out life insurance, it’s otherwise never too early to consider it. In fact, there is definitely a benefit to taking out life cover when you’re younger, since it’s usually cheaper. This is because insurers base the cost of your policy on risk factor: i.e. how likely you are to die during the policy term. Most people however wait to take out life insurance until they have financial dependants, or become a homeowner and take on a mortgage, which is certainly a time to seriously consider life insurance.
Myth: I don’t need life insurance because I don’t have children
Having children is often the impetus for taking out life insurance, and it is certainly a good reason for taking life cover. However, it is by no means the only reason to take out life insurance and everyone should still consider it, even if they don’t have any dependents. For example, your named beneficiaries, such as siblings or other loved ones, could receive a lump sum, even if you don’t have someone who is directly financially dependent on you. Also, though it’s not always compulsory, some mortgage providers will insist on your having life insurance, and it’s a good idea to take out a policy when you get a mortgage even if they don’t. Importantly, if you have a partner named as a beneficiary in your will, or if your policy is in a trust that they’re named in, they could use the amount paid out to cover bills, pay off a mortgage, and stay in the home after you’re gone. Additionally, with a trust, the pay out will not be counted as part of your estate.
Myth: I don’t need life insurance because I’m covered at work
Your employer may include a form of life cover in your benefits package, sometimes known as a death in service benefit. This will typically pay out a lump sum of around four times your salary to your chosen beneficiary if you die while you work there, but the policy will vary from employer to employer. Even if your current employer offers this, it’s still a good idea to think about whether the level of cover meets your personal needs, as you won’t usually be able to make changes to personalise the policy. You should also consider what would happen should you lose your job.
Myth: Insurance companies never pay out
This is a common misconception, but in reality 98% of life insurance claims are paid out. There are, however, some ways to ensure a a future claim is paid, and that the process of claiming is as simple as possible for your loved ones. Make sure that when you apply that you answer all questions truthfully and accurately, and also be sure to let your family know you have life insurance, including who the policy is with and the policy number.
Myth: Life insurance will only pay out if I die
It is fair to say that the most standard life insurance policies are usually designed to pay out when you die, but there are policies available for all manner of circumstances. Some insurers offer a terminal illness benefit included in their life cover at no extra cost, for example, which pays out if you’re diagnosed with a serious illness and you’re not expected to live longer than 12 months. You may also want to consider critical illness cover, which offers a lump sum if you’re diagnosed with one of a number of listed conditions. This helps to reduce financial worries while you (and possibly your partner, if they’re having to care for you) may be unable to work, enabling you to focus on your health and spending time with your loved ones.
Myth: I’ll need a medical examination and a credit check
This depends on the individual, their circumstances, and the amount of cover applied for, but a medical examination is not normally required when you apply for life insurance. Again, this is another benefit of applying at a younger age, as you’re less likely to be asked to attend a medical examination the younger you are. There’s no need to worry about credit checks, as insurance providers don’t require a credit check before they offer a life insurance policy.
Although life may be unpredictable, we’re here to help give you peace of mind and recommend the best policies to protect your family and business. Our friendly team of advisers will guide you through the many different types of policy to ensure we find the right cover for you, based on your stage of life and your individual circumstances. We use our expertise and experience to find life insurance, critical illness cover, income protection, mortgage protection, and business protection policies for both individuals and businesses. We pride ourselves on building long-term, collaborative relationships with an emphasis on personal service and good, sound financial advice. To book a free consultation, contact us here.
