Unless you're single with no dependants, I firmly believe that getting enough life insurance should be your number one financial priority. But the trouble is, many of you think you've got all your protection bases covered, when in fact there's a huge shortfall in the cover you really need.
Here are five common reasons why people often don't buy enough life cover. I'll explain why each one is a myth. Here goes...
Jane Baker explains why life insurance should be your number one financial priority
1. I've got life cover for my mortgage. I don't need more.
Life insurance probably appeared on your financial radar when you bought your first home. New homeowners are normally pretty good at buying cover so the outstanding mortgage loan can be repaid should the worst happen to them. This means the roof over your partner and children's heads is safe even when you're no longer around.
After that life insurance is often ticked off the 'to do' list and never thought about again. But I'm afraid this is rather short-sighted. As key events take place in your life such as taking on a bigger mortgage when you move on to a larger home or starting a family, your protection needs usually increase.
It's at these times that you need to seriously think about extending the cover you already have. You should also think about taking out cover for any non-mortgage debts that you might have.
Thankfully getting a new policy up and running is pretty easy. All you need to do is check out the lovemoney.com life insurance service to help you find the cheapest quote - and away you go! Plus, if you take out a new life insurance policy with lovemoney.com by 7th April, we’ll give you £100 to say thank you. Find out more
2. I'm covered by my employer
Many of you will have death in service benefits as part of your employment package. Normally, a lump sum of three or four times your salary would be paid to your dependants on your death. So, if you earn say, £30,000, your life cover might be £90,000 to £120,000.
This is a great foundation, but it probably doesn't give you all the protection you need. Worse still, if you leave your current job and move to a new company where death in service isn't on offer, you'll be left with no cover whatsoever. And you may find it more difficult to get life insurance at this point, particularly if you've fallen into bad health. So, once again, you need to think about taking out your own individual policy to avoid a shortfall. If you're not too sure how much cover you ideally need, use this calculator.
3. The state will take care of my family
It really is very risky to skip life insurance entirely and rely on the State to take care of your family's financial needs in your absence. It's true there is some financial help available from the government, but I can't really stress enough how limited it is.
For example, your spouse or civil partner may be entitled to a tax-free Bereavement Payment of £2,000 on your death as long as you have paid sufficient national insurance contributions. But this amount really won't last long. And if you have a joint mortgage with a partner and you die, your partner will be liable to meet every penny of the mortgage payments by him or herself, or face losing the family home.
If you leave financially dependent children behind, your surviving spouse or civil partner may be entitled to Widowed Parents Allowance (or WPA). But, on current rates, the maximum payment is just £95.25 a week.
I think it's pretty easy to see that State benefits alone definitely won't provide all the protection your family needs.
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4. Life insurance is too expensive
There's a common misconception that life insurance usually costs an arm and a leg. But this isn't necessarily the case. What's more, protection across the board is cheaper now than it has been for seven years.
So, if you're reasonably young and in good health, there's no reason why you can't find an affordable policy. All you need to do is compare quotes using the lovemoney.com life insurance search engine.
For example, on today's rates, a 35-year old man (who doesn't smoke) can get £200,000 worth of cover for 25 years for just £15.34 a month at the most competitive insurance company. I think that's a small price to pay for the peace of mind it'll give you and your family.
5. It'll never happen to me
Finally, the 'it'll never happen to me' mentality is really dangerous, because it can and it does. In fact, it will. There's nothing surer than death and taxes, after all.
So I'm afraid sticking your head in the sand doesn't reduce the risks. And it's this risk you're insuring against when you buy a life policy.
Think about it this way: Would you really risk leaving your family with a financial nightmare for the sake of saving £15 a month or so?
Thought not. So, make sure you review your cover today before it's too late.
Get rewarded with £100 for being boring
Here at lovemoney.com, we know that sometimes it takes a little incentive to sort boring financial stuff out - and let's face it, life insurance is pretty boring. But it's pretty important too, so, until the 7th April, if you take out a new life insurance policy with lovemoney.com, we’ll give you £100 as a reward - just for being boring.
Plus, our quotes are also among the cheapest you'll find anywhere. But don't take our word for it: get a quote now to get your reward.
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