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Written by

Cherry Reynard

Content correct as of

04 May 2018


Life insurance: a little goes a long way

It’s quite gloomy, obviously, to think about death. And you can reasonably argue that it’s not particularly likely to happen in the short-term.

 Life insurance is one of those things: it’s typically better to do something rather than nothing. There’s always that proverbial bus to run you over - no-one is immune from the unexpected. Death is pretty unpleasant for families anyway, and the last thing you want is to leave them with money worries as well.

This is where life insurance comes in. It is clearly important if you are the main bread-winner, but also shouldn’t be neglected if you provide the bulk of the childcare either. Childcare is expensive and costs a lot to replace.

If you have no dependants, it may actually make more sense to consider income protection insurance. This protects you if you are incapacitated and can be a higher priority if you don't have children or financial dependants to worry about.

Usually, you will have some kind of cover if you are employed. An employer may provide two or three times your annual salary as a ‘death in service’ benefit. This sounds like a lot and will certainly provide a few years’ financial breathing space, but it won’t last a lifetime and you will need to see whether it gives your family enough to survive financially for as long as they need.

If not, or if you are self-employed, you may want to consider buying life insurance privately.

Even if you’ve got it sorted, exert some pressure on your partner to get it sorted as well. You can buy joint life insurance.

If you can only afford a relatively small amount of life cover, do that and give up a takeaway each month rather than do nothing and take the risk.

One final point to note is that you need to ensure that your ‘expression of wishes’ form is up to date. Here’s a template. This makes it clear whom you would like your money to go to if you die. If you want the money to go to your family, you need to make sure it says so; if you want it to go to Battersea Dogs Home, that has to be explicit too.  This is particularly important if you are not married as you may leave your partner facing mortgage payments alone while your brother is living it up in Vegas. Not ideal.

To do list:

1)  Have ‘the conversation’ – talk to your family about money, your resources and how they would cope financially if you were to die. Morbid but necessary. 

2)  Check your existing resources – if you’re employed, what does your company provide, for example?

3)  Once you’ve got an idea of the type of cover you need and how much, you can compare prices and terms on one of the price comparison sites.

4) Sign up, and relax.

Life insurance – how much should you expect to pay?

As a 44-year old, London-based occasional-exercising lady in reasonable health with very few bad habits (ahem), my life insurance comes out at around £20 per month for £200,000 worth of cover.

I tried a few variables. If I was 55 and a smoker, living in Bootle in Merseyside, the same life cover leaps up to £138. That said, male smokers living in Cheltenham fare little better – their cover costs £122. The key difference is – you’ve guessed it - the fags – though age and location will have an influence.

If you’re going to add in critical illness cover – that pays out when you can’t work because of ill-health – that is more expensive. For £50,000 of cover if I were to fall prey to strokes, advanced cancers, heart attacks and so on, I’d pay an extra £100 a month on top of my life cover.

This leads to a rather preachy and tedious conclusion. If you can’t live somewhere nice, at least give up smoking. It will save you a fortune on your life cover.

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