Life Assurance
Life Assurance is used primarily:-
To provide money for people who financially depend on you.
If there is no one who will be financially distressed by your death, life assurance is probably not essential, though there are other reasons why it would be useful.
That said, the following are all situations that may require the use of life assurance.
- Mortgage. If the house is to be lived in by your partner or children then it is normal practice to ensure that the mortgage is cleared on death.
- Money for dependants. If you have small children then money will help provide for them, perhaps by allowing the surviving partner to stay at home or work part time for some years.
- Business debts. Banks and creditors get worried when key people die. Credit lines get shortened or even pulled, often with fatal consequences for the business. If you are a key person your business could insure you to provide cash flow to settle all debts and recruit a new person.
- Business Partners and Co-directors. If you die you hope that your colleagues will pay a fair value for your share of the business, but they can only do this if the funds are available. Assurance can be used to provide this.
The good news is that many people already have some life assurance, and in many cases this will suffice for their needs, although as needs and circumstances change, it may need updating.
If you are a member of a good company pension scheme, read your benefits booklet. You may well find that if you die your spouse and/or children will get a lump sum and/or a pension. (If you provide us with the details we can calculate the benefits and make sure that they will be sufficient. One problem with some old fashioned schemes is that unmarried partners are not always treated as a spouse.)
You have probably already got life assurance to cover your mortgage, but it would be worth checking that the current level of cover is sufficient for your current situation.
If you are not in a good company pension scheme and are self employed, or in business, and have dependants, then it is essential that you have your position assessed. We can help you do this.
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More good news is that life assurance is not as expensive as you might think. For example imagine the man with a young family. At the time of writing there are a number of companies who will provide £100,000 of cover for 10 years for a man age 34 for under £10 pm *.
For a 45 year old professional man who wants to ensure that his wife gets the full £250,000 value of his share in the business for a ten year policy to take him through to anticipated retirement, some companies will charge less than £30 pm. *
Life cover via Pension - You might be able to save money, (you'll get tax relief on the premium), by arranging life cover through your pension. Most Employer provided pension schemes will include life cover, and if you are not in such a scheme, you can buy it through a personal pension.
*Source Norwich Union, 10th April 2008. Rates are for Level Term Assurance for a non smoker in an administrative occupation, and do not include premium protection cover.
Last updated on April 11, 2008