Life insurance is a big consideration to tackle. So many people are unintentionally putting their families at risk of significant financial upheaval should something happen to them, and life insurance offers a simple solution to a potentially devastating problem.
But life insurance isn’t as common as it should be. In 2022, it was estimated that just 35% of the UK’s adult population was covered by a life insurance policy.
For so many people, the question is easily deferred or pushed out of mind entirely – often thanks to some common (and damaging) misconceptions about what life insurance is, what it does, and who it is really for. At Perennial Wealth, we have been offering independent financial advice in Bristol for many years and know exactly what keeps so many people from obtaining the coverage they and their families really need.
Here’s what you need to know.
Life Insurance Can Wait
We hear this one all the time: ‘I just think I’m too young to need life insurance yet’. It’s an easy, convincing way to put off a difficult conversation, and it’s perfectly understandable why we prefer to think this way. It’s the same reason we avoid investing in our pensions during those crucial, early years of employment – or why we delay writing a will, sometimes until it’s too late.
The trouble is, this is easy to do but impossible to undo.
Life insurance is there to offer a safeguard against many, many unknowns – all those worst-case scenarios that we won’t see coming until they’re right here in front of us.
What’s more, securing a policy early on in life can mean that your premiums are much more manageable. When anyone applies for life insurance, the company will take a detailed look at a long list of factors that may impact their risk level as a policyholder. Age, health, occupation, and other aspects of your lifestyle can (and often will) influence the premium you have to pay. When we are younger, we are less likely to hit certain criteria for health and wellbeing, which is good news if you’re looking to take out a policy now.
Of course, that’s not to say that, if you have put off the decision, you’re too late to find any reasonable policies that offer good, comprehensive coverage and manageable premiums. We’re used to identifying the best possible policies for a wide range of clients, all with their own criteria and concerns influencing the sort of policy they’re hoping to find.
Ultimately, however, the best insurance and protection policies tend to be available when you’re still young. Yes, it means paying more over the years, but that money is not being wasted and represents a valuable investment into your family’s future.
If I’m Not the Primary Earner, I Don’t Need Coverage
A lot of people assume that, if they’re stay-at-home parents or only part-time workers supported by someone who brings a lot more money into the household than they do, then a life insurance policy for them is pointless. After all, if their income doesn’t mean the difference between a mortgage payment and arrears or between keeping the cupboards stocked and the children fed, why would a pay-out (and the premiums required to get that eventual pay-out) be necessary?
It’s a real mistake to think this way – but, unfortunately, it’s often the line of thinking people take when they transition to a single-income household.
Secondary earners or stay-at-home partners bring a huge amount of value to the home, even if it’s not strictly monetary. For instance, if you are a stay-at-home parent and pass away unexpectedly, your partner will need to take on the steep cost of childcare in order to keep working. Some estimates suggest that a stay-at-home parent is worth around £80,000 per year in terms of the practical jobs they handle on a daily, weekly, and yearly basis.
Of course, not everything can be quantified in that way, and no life insurance pay-out could compensate for the loss of a partner and parent. But life insurance coverage gives your loved ones a bridge onward – a practical way to cope with life without you. For that, it’s worth a huge amount.
It’s Too Expensive for Someone Like Me
Life insurance policies exist on a very broad spectrum. Yes, some are incredibly expensive – they cover individuals for millions and likely end up the focus of a gritty, fictional family drama on Netflix. For the rest of us, life insurance policies may not come wrapped up in intrigue and complex dynamics between family members – but, really, that’s all for the better!
Many policies will offer suitable coverage for the average person. Premiums are much lower and more manageable alongside the rest of your household expenses – and, of course, that naturally means that the benefit amounts offered are lower, too.
But life insurance isn’t a tool for ensuring your family ends up wealthy – it’s a necessity for ensuring that, after your death, your loved ones and dependants are left on firm financial footing without fears of covering routine bills like the mortgage.
Life insurance is as valuable for those earning 6-figure salaries as it is for those earning the UK average of £34,963. True, those two ends of the spectrum won’t end up on the same policy, but that’s not to say it isn’t still a shrewd financial decision for both parties.
Loopholes Will Mean My Family Won’t End Up with the Pay-Out
While a certain amount of scepticism is always healthy, you don’t need to feel this way if you’re getting personalised advice on the subject from someone who really knows what they’re talking about. Yes, life insurance policies – like any big contracts or commitments – are bound up in a lot of confusing legal jargon spread across many clauses and subsections, and digesting one on your own is, to put it simply, a big ask.
But these contracts aren’t written to confound and daze, and all that verbosity will be on your side in the future – provided you get the right advice. Most life insurance policies – and, really, any life insurance policy from a reputable source – are not simply designed to drain your finances over the course of forty or fifty years then worm out of paying your family the money they should be due. Without the right guidance, it’s easy to feel as though the odds are stacked against you, but that needn’t be the case.
Independent advice means you don’t need to worry that the wool is being pulled further over your eyes. The team at Perennial Wealth have no vested interest in signing you up to A’s policy or B’s contract – our only priority is ensuring that your financial future is as secure as it can possibly be.
I Won’t Get Coverage if I Already Have a Medical Condition
Pre-existing health conditions are one of the most significant criteria used by insurance companies to determine the cost of coverage, but that’s not to say it’s a black-and-white, yes-or-no situation. If you have been diagnosed with a specific health condition or making routine visits to the GP about significant symptoms, then there is a strong chance that your premiums will be higher than they are for someone who enters into the policy without any existing health conditions.
Keep in mind, however, that very few health conditions or medical histories would cause those premiums to skyrocket. Everything is relative and, while finding the right policy may take a little more searching, it’s far from impossible.
If you’ve consulted with a restricted advisor in the past, then you may have already decided that, yes, it is impossible. This is because restricted advisors are limited to options and may not be as flexible when it comes to finding a policy that fits your health and lifestyle. As independent advisors, we are in the right position to conduct a much wider search and apply our years of expertise to your unique case.
Medical conditions do not preclude you from getting the coverage you and your family need.
Life insurance is so important but, unfortunately, the subject continues to be shrouded in controversy and incorrect assumptions. While the marketplace does see its fair share of less than favourable policies being offered to unsuspecting (and perhaps too trusting) customers, there are plenty more policies out there to suit different circumstances and requirements. Not everyone needs a hefty pay-out to go to their loved ones after they die; a lot of us can think more practically about the sorts of costs that will need to be covered – the mortgage, the funeral, or any outstanding debts you may pass onto your next of kin.
If you’re considering taking out life insurance – or, conversely, think you could probably do without one – then we’re always happy to talk things through, look at your options (along with the positives and negatives), and put you on the right course. Just get in touch with us today, and we can organise an introductory meeting with you to go through things.