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The arrival of a new family member is a very special time for any new parent. It’s a time of learning, bonding and for many, a time of financial stress. With a growing list of new equipment to buy plus an extra mouth to feed at a time when many couples are reduced to just one full time salary, you can be forgiven for feeling the strain on your pocket. As a result, many new parents unknowingly put their family’s long term financial security at risk by avoiding arranging cover such as life insurance.
But ask yourself this. If you were no longer around to help pay the bills and support your family financially, what would happen? A life insurance policy gives you the peace of mind that if the unthinkable were to happen, your child and anyone else you financially support, would be secure.
So what is life insurance?
Life insurance is a policy taken out for a set term, for example 25 years, which pays out if you were to die, be diagnosed with a serious illness or be unable to work for an extended period of time. It helps cover the day to day living expenses you face such as bills and food shopping plus most importantly any debt for example your mortgage.
A lump sum payment can be made if you die or if you’re diagnosed with a terminal illness.
How much cover should I get?
The amount of cover you take out depends on your current circumstances and takes into account your income and the cost of your regular outgoings if you were no longer able to contribute.
You don’t want to buy more insurance than you need but at the same time, you would not want to leave your family with too little if something was to happen to you. Carefully make a note of any large payments you make, how much you have left on your mortgage and what your living expenses add up to. As a rule of thumb, payouts can be around ten times the family’s income.
You may consider taking out cover which protects your partner or even take out two single policies rather than a joint policy which pays out if you or your partner should die or be diagnosed with a terminal illness.
The policies term and cost
Life insurance is taken out over a long term for example 10 or 25 years. If your circumstances change during this period, for example if you have another child or buy a bigger house, then you should contact your life insurer immediately and inform them of these changes.
The cost of your life insurance premium (regular monthly payment) depends on the following factors: the length if term the policy is taken out over (number of years), the amount of cover you take out e.g. £100,000, your age and level of health plus your job and any hobbies you regularly undertake which may be deemed as risky.
It is very important, when taking out your life insurance policy, that you provide your insurer with full and accurate information. If you or your family every needed to cash in your policy and your information was not up to date or accurate, your insurance provider is within their rights not to pay out.
Although life insurance can appear an unnecessary expense at a time when you are already paying a lot out, being safe in the knowledge that your family and child would be financially secure if anything should happen to you, makes it worth every penny.
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| Joint Life Cover | Income Protection Insurance | Family Income Benefit Assurance |
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