Major milestones such as getting married, buying a house or starting a family can have large impacts on your financial situation. Because of this, your life insurance needs can change significantly over the course of your life. Whether you’re just starting out, starting a family or planning for retirement, having the right life insurance can help you provide for the people who depend on you.
Major milestones such as getting married, buying a house or starting a family can have large impacts on your financial situation. Because of this, your life insurance needs can change significantly over the course of your life. Whether you’re just starting out, starting a family or planning for retirement, having the right life insurance can help you provide for the people who depend on you.
1. Just Graduated
If you’re just out of school and you don’t have any dependents, you probably aren’t thinking about life insurance. But it’s important to protect yourself and the people that are helping you out along the way. Life insurance can protect co-signers from acquiring your student loans and other debts2, and as an added benefit, buying a policy at a young age may result in lower premiums.
Millenials (people aged 18-35) are the most underinsured generation since the war.[1] “Many people fail to see the need for life insurance when they have neither a family nor a mortgage” according to a study last year by Gen Re, “Economic reliance on parents is prolonged and people are becoming independent later in life” but buying life insurance early and investing in an income protection plan can be a wise purchase.
The Council for Disability Awareness reports 1 out of 4 young workers will have a health issue that keeps them from working in their lifetime [3]. And it’s not always a fall or a cut; back injuries, cancer or heart conditions can have people out of work for a few months or longer. “They don’t understand the risk they face every day and that they are left exposed,” said Jessica Vanscavish, vice president for voluntary products at Prudential Group Insurance.
2. Getting Married
You vow ‘til death do us part’ but could your partner actually manage your financial obligations if that were to happen? Life insurance can help your partner maintain their standard of living should you pass away including staying in your home without a second income.
Living alone on a single income can be more costly because you don’t have anyone to split household bills with. According to LV=, singletons spend £1,826 a year more on housing and utilities than if they were living as part of a couple [4], even with the single person’s Council Tax discount given factored in.
The research found that single households pay £1,392 more on mortgage and rent per year than someone living in a couple, £294 more on utilities and £140 more on household goods and services. These extra costs add up. When you’re suffering a bereavement, the last thing you need is money worries to compound the suffering.
If you run the household instead of going to work, life insurance can help your spouse cover the cost of childcare and other household duties in your absence.
Conservative estimates put the value of a stay at home parent’s work (cooking, cleaning & childcare) at £35,929 a year [6] and more generous estimates from the united states put it at over double that figure £77,173 ($112,962) [6] when you account for everything they do.
3. Buying a house
Mortgage payments, utility bills and maintenance costs add up fast! So ensure that your home won’t become a burden for your dependents and beneficiaries. Options like a term policy can provide coverage based on the duration of your mortgage. Even if you don’t have a mortgage, you’ll still have ongoing living costs associated with your home.
Many mortgage companies require you to have a life insurance policy in place when taking out a mortgage so make sure that you choose a policy that will provide adequate cover for your family. Paying off the mortgage is just one consideration, add to that living costs and cover to replace lost income and you have a better idea of what cover you should be looking at.
If you’re a business owner, there are specific business policies to protect business interests, partners and shareholders.
4. Starting a family
Consider how you or your partner would cope financially if the worst happened. There’s no way around it, kids are expensive! The costs of childcare, food, clothing, sports and tuition will be significant, especially for a single parent.
On top of basic essentials consider the cost of holidays, school trips, Christmas, birthdays, proms, university, weddings, deposit for their first home etc. Wouldn’t you like to know that you can still contribute to these things, even if you’re not here in person?
Often families only consider the impact of something happening to the ‘main breadwinner’ but it’s important to remember that even if one you is a stay at home parent, the financial impact to the family could be considerable. Conservative estimates put the value of a stay at home parent’s work (cooking, cleaning & childcare) at £35,929 [5] a year and more generous estimates from the US put it at over double that figure £77,173 [6].
With UK education costs alone reaching an eye watering £74,319 and childcare and babysitting averaging a staggering £67,586 [7], it’s important to consider the impact on your family should you not be there. Life insurance can preserve the life you’ve built for your family and ensure they still have access to all the opportunities you’ve envisioned for them.
If you have young children now is the time to review your life cover.
5. Starting a business
The UK is a country of entrepreneurs and small business owners with over 5.5 million Small to Medium sized enterprises (SMEs)[8]. If you plan to start your own business, just be sure that you and your family are covered if you are no longer able to work. There are life insurance products designed to fit the specific requirements of business owners including ones that protect the interests of both your dependents and any business partners or major stakeholders, which can save a huge amount of stress and future legal wrangling. If your business is young, then you can choose a policy that will grow with your business.
6. Getting Divorced
Even though separating couples may be preoccupied with dividing assets, it’s important not to neglect the insurance needs during a settlement, especially when there are children involved or if alimony is being paid. Purchasing a life insurance policy can help ensure that funds are available to cover the income of the spouse responsible for paying child support or alimony or cover the cost of childcare if the primary caregiver passes away.
Don’t forget, if you had to pay someone to do everything a stay at home parent does, the cost could be anywhere between £35,000 and £70,000 plus a year, the younger your children are, the closer to the higher end of that estimate the actual costs are likely to be.
Divorce is stressful enough without the uncertainty of how you would cope if anything happened to your ex, there’s unlikely to be a provision in the Will to cover you.
Did you know: About 15% of middle-aged adults are providing financial support to both an ageing parent and a child.
7. Supporting Kids and Parents
If you find yourself sandwiched between supporting your grown children and your ageing parents, you’re not alone. As the cost of care homes increases and more and more young people struggle to get a foot on the housing ladder, there’s an increasing number of middle-aged people taking on additional financial responsibility, who are really feeling the financial pinch. Life insurance can help protect all the loved ones who are dependent on you.
8. Planning for Retirement
If you, like many, are heading into retirement with debts, a mortgage that isn’t paid off, or you are still working part time and your spouse relies on that money, then Life Insurance may be an important part of your retirement plan.
Did you know? One-third of homeowners over 45 with a mortgage do not expect to pay it off beforem the age of 66 [8]
Other things to consider
Comparison sites have become a popular place to buy insurance and although it’s convenient to shop online unless you’ve really done your homework you could make a costly mistake. Life insurance is one of those areas in life where speaking to a professional can really help you in the long run. Our qualified financial advisers will ask the right questions and ensure that all relevant information is presented to the insurance company so that you don’t end up with any nasty surprises later or claims being rejected over the small print. They’ll also shop around to find the best deal for your circumstances.
If your circumstances change then you should inform your insurer, some things may actually save you money, like losing weight or quitting smoking (there may be a qualifying period for this) or you may find that you no longer need the same level of cover (i.e. if your children have grown up or you no longer have a mortgage).
Other things to consider:
- Term required
- Policy Scope and limitations
- Policy exclusions
- Pre-existing medical conditions
