Understand why its important to review your life insurance regularly…
We live in interesting and uncertain times. And now – probably more than at any other time in our lifetime – it is even more important that we review life insurance…
A lot has changed in a very short space of time, and many of us are likely to be re-examining our lives, our work and how we live over the next few weeks, months and even years.
And while we are taking stock, it is more important than ever that we review our life insurance.
Things like house and car insurance automatically get renewed each year – and most of us take the time to check that our circumstances have not changed before hitting the renew button. We go online to check if we can get a better deal. But life insurance doesn’t offer us that early reminder – many policies last for 20 or 30 years – and yet it is probably even more important that we ensure the protection we have still covers us for what we and our family need.
If you are facing, or planning any major life changes, it is the perfect time to reconsider your life insurance cover. You might have got engaged, be buying a house or be planning a family. You might have entered a new relationship, or ended an old one, or be looking forward to the birth of a grandchild.
Circumstances change – and that’s something we have all been learning recently – and your life insurance should change to acknowledge that.
Buying a house
Whether this is your first home purchase, you have moved to a more expensive property or you have borrowed extra to pay for improvements to your home, ask yourself, would your existing policy still cover the mortgage if you died, or would your partner be left to cover the shortfall?
Starting a family
When there’s just the two of you, should one of you die, the other one may be able to manage financially, if they are still working and bringing in a salary. But if you have children, there will be more expenses and your partner may have to give up work or face huge childcare costs, just to keep the family on an even keel. The insurance you first took out, when there were just two of you, to pay off half the mortgage may not be enough for a partner left as a single parent.
Not only that but children become more expensive as they grow up. Sports clubs, school trips, university fees, driving lessons – it’s not just about covering them for nappies and baby equipment. You should be realistic about what money will be needed if you are not providing for them.
You should also review your cover when you add another child to your family.
Most of us are lucky enough to get promoted or move to better paying jobs as our careers progress. We get used to surviving on a better salary than when we first bought a house, got married or started a family. If you haven’t renewed your life insurance for several years, will it still cover the money you would have paid into the family? Or will your family be left struggling to pay a bigger mortgage, more expensive car payments and so on?
Growing older and retirement
On the flip side, once you’re older you may downsize, your children leave home and you pay off the mortgage. You should review your life insurance to make sure you could not be on a better-value plan, especially if you are living on your pension.
There are other things to consider. You may wish to change the type of cover you have – whole of life cover will pay out whenever you die, whereas a term policy only covers you for a set period – usually 20 or 30 years. It is also worth examining if your policy is held in trust, which means it goes straight to the beneficiary should you die and avoids inheritance tax and any delays that might occur while your estate goes through probate.
We explain the different types of life insurance here in a previous article.
This is the ideal time to talk to an independent insurance consultant – for a free, no-obligation discussion about whether your life insurance is adequate to protect your family at this uncertain time.
If you would like to discuss life insurance, or any changes to your financial situation during the COVID-19 pandemic, we will be happy to help. Please contact us without obligation.
Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across the South of England including Oxfordshire, Buckinghamshire and Hampshire. If you would like to discuss this subject or any other financial matter, please contact us on 01635 521 300 or email firstname.lastname@example.org.