“That’s an interesting article about Life Insurance” said no one ever.
To be frank and we need to manage your expectations here; the next few hundred words won’t change that.
But, whilst boring, the next five minutes (assuming you continue reading) could be the most important you have ever invested into your family’s financial future.
Think for a moment
How would you and your family pay your mortgage if you were ill or died?
With apologies to the single people reading this, when you arranged your mortgage application you probably needed both household incomes to justify the amount you want to borrow. And, of course you probably need both to meet your other monthly commitments.
Therefore, if one income is lost, due to death or illness, something must give. Which bill won’t you pay?
Mortgage? No, you need to pay that unless you want your home to be repossessed.
Utilities? No, you need heat, light and water.
Food? You could cut down or change where you shop, but you and your family need to eat.
Still not convinced? Compare your monthly income and expenditure. Hopefully you have surplus income, or at least break even.
Now remove one of the incomes. Do you still have a surplus? No? You have a problem if one of you is ill or dies.
You get the picture; for most people, losing a household income will mean some tough choices need to be made.
How likely is it?
Perhaps more so than you think.
What are the chances of you dying, becoming seriously ill or having two months or more off work, before you reach the age of 65? The answer depends on your age, gender and smoking status.
30 year olds:
- A male has a 37% chance, rising to 54% if they smoke
- Females have a greater than a 50/50 (54%) chance, increasing to 66% for smokers
40 year olds:
- Not much change from a 30-year-old male, with a 36% chance, again rising significantly for smokers
- Females still have a 50/50 chance (48%), increasing if they smoke
(Source: Royal London)
The answer
Insurance.
No, no, please don’t go anywhere, this is the important bit.
For most of us, the cost of buying insurance to repay our mortgage should we die (Life Insurance) or become seriously ill (Critical Illness Cover) is far cheaper than we imagine.
Let’s look at indicative monthly costs:
£100,000 life cover £100,000 life & critical illness cover
25-year old £4.14 £10.13
35-year old £4.86 £19.61
45-year old £7.52 £37.85
(Please note: All figures assume you are a non-smoker and are for a Decreasing Term Assurance over a 25-year term.)
We’ve used the £100,000 figure so you can calculate the approximate cost of the cover you need.
For example, if you are 35 years old and need £250,000 of life cover, simply multiply £4.86 by 2.5.
As a talking Meerkat once said, simples!
Of course, in real life, it’s a bit more complicated than that; and we are here to help.
If you’ve made it to the end of this article, thank you! If you’re feeling a little exposed right now and worried about the financial future of your family if you are ill or die, get in touch, let’s have a coffee and a chat. As we said, it’s an important subject.
You can reach us on 0207 808 4120.