How to make sure your loved ones are cared for when life happens #Life insurance

I have been thinking about what financial products are available to support individuals when the unexpected happens. In this post, I explore life insurance and find it can be a useful investment allowing your dependents to benefit from an additional source of income.

The combination of your savings, investment and life insurance payments, can provide a very stable financial foundation for those you care about.

About life insurance
Life insurance is a financial product that provides your dependents with income in the event that you pass on. This is particularly important for parents with children and individuals with partners/spouses. As part of my exploration into wealth protection, I have found that life insurance allows you to continue to provide for your dependants so that they do not have a lower quality of life. Using the insurance payout, your dependents can pay mortgage payments, pay for education, manage other expenses as well as continuing to save and invest.


How to get life insurance...

With your employer
Typically, employers provide life insurance as part of employee benefits package. In this scenario your employer will ask you to identify your dependents and sometimes you can allocate the percentage that should be allocated to them. Having an employer provided life insurance package provides coverage if you pass on while you are an employee of the firm. If you move to another job, you will lose the coverage. So check the terms and conditions carefully.

On your own
If you wish to have life insurance coverage that is not dependent on your job, you can shop online from providers such as Vitality, AIG, Scottish Widows, Virgin Money and more. My research has shown that you should seek life insurance policies that is at least 12 times your annual income so if you annual income is £30,000, you should seek coverage of £360,000.

How much does life insurance cost?
The monthly cost of Life insurance varies substantially and can range from £2,50, £6,  £12,  £30. This is variation can be due to a number of factors:

1. Your age:  typically, the older you get life insurance, the more expensive it will be

2. The term of the policy: What length of coverage are you seeking, is it 25 years or unlimited?

​3. What will the policy cover: do you want mortgage cover and/or financial payments to your dependents? The more you cover, the higher the monthly costs.

4. The payment plan you choose:  Level or decreasing term

Level Term The payout will remain the same over your chosen term. So if you elected a payout of £360,000 over 25 years, your dependents will get that amount if something happens to you over the selected term.

Decreasing term: The payout decreases over the term of the policy and is typically used to cover specific debt like a mortgage. If you obtained a decreasing policy of £360,000 over 25 years, your dependents will get a higher payout at the beginning and as the 25th year approaches, the payout will approach £0.

Your own monthly payments will be advised by your insurance provider and there is also no limit to the number of life insurance policies you can purchase.

Is life insurance for you?
I like the idea of allowing my investments and savings to continue to grow and have my dependents benefit separately from life insurance payments. The combination of your savings, investment and life insurance payments, can provide a very stable financial foundation for those you care about.

 Should you get life insurance if... (my view)
Yes if,  ​you have dependents- children, a spouse or parents, it is beneficial to get life insurance. 
It Should at least be 12 times your annual income 
And is separate from your job so it follows you and does not end if you leave a job

Spread the word!
After reading this, do check if your parents have life insurance and discuss why it matters. If you know of parents or individuals with dependents, inform them as well so that they are armed with the right options and information.