The environment that we currently find ourselves in provides us with an opportunity to take stock of a lot of things.
One of these things is our finances and particularly our own personal finances.
An important aspect of this is life assurance.
I don’t know about you, but I’m being bombarded by advertising when I’m on social media from life assurance companies trying to sell different policies.
What is interesting is there are lots of new companies out there, including some companies that I’ve never heard of, using very catchy advertising and interesting concepts to grab our attention. But we don’t know anything about these companies. We don’t know who they’re underwritten by. But we do know that this is a very important topic that we’re talking about.
What we are talking about is a payout to your family in the event of death, which may involve a potentially life-changing amount of money, and therefore it is worth examining your options thoroughly and with a reputable adviser.
What to consider when selecting an adviser for life assurance
When selecting the right financial adviser to provide life assurance, my checklist is that they should be:
- have access to all of the insurers in the market;
- not be tied in with a single provider or insurer;
- be regulated with the Financial Conduct Authority (FCA); and
- be fully qualified to provide financial advice, ideally with a level 6 qualification.
The other consideration is how much life cover do you need?
When considering how much life cover you may need, it’s not simply a question of thinking about the first large sum that comes into your mind! The amount that you are insured for should be tailored to your personal circumstances.
The following is a checklist to consider:
- what mortgages or debts you have;
- what aspirations you have for your children and/or other family members (e.g. costs of education/helping them get onto the property ladder);
- the cost of living for your family in the future;
- any charitable contributions you might want to make; and
- whether you would like to settle inheritance tax liabilities.
It is important to note that if these events are to take place in the future, the amounts required will increase by the rate of inflation, so today’s value will not always be sufficient.
A certified financial planner will be able to calculate the sums required to meet your requirements and to make sure that you are not over-insured, whilst at the same time making sure that the insurance policy payouts are inflation proofed.
Why should you take action now?
Putting aside the current climate and the possibility of contracting COVID-19, as you get older the cost of life assurance will increase. In particular, as you pass the six-month anniversary of your birthday, premiums will increase as the insurers will see you as an increased risk.
The best time to apply for life cover is when you are healthy. This may sound counter-intuitive, but if you become ill or suffer with a particular medical issue there is the chance that you may become uninsurable, or that the insurers might add on a ‘loading’ to the cost of the policy as you are considered an increased risk.
As a final point, some life assurance policies can be very tax efficient and paid for by the company that you work for as an employee or a director.