The importance of life insurance

This is a guest post from Reassured.Life insurance payout myths & facts infographic (2018)Do I need life insurance cover?

We believe having life insurance is imperative for the vast majority of UK adults. Read on to find out why we say this and let us help dispel some of the myths surrounding life insurance.

Take the biggest financial commitment many of us are likely to incur, buying a house. If something were to happen to you, would your family be able to afford the repayments and remain in their home?

The average UK mortgage balance is £121,687[1]http://themoneycharity.org.uk

Life insurance cover can protect your home, clearing the mortgage in full, if the worst were to ever happen. Ensuring a crippling debt is not passed to your loved ones.

Other benefits could include:

  • Cover future living expenses
  • Cover household bills
  • Fund funeral costs
  • Provide an inheritance
  • Clear outstanding debts.

Research published by life insurance broker LifeSearch suggests 26% of us spend up to £25 each month on takeaways and 25% up to £10 on takeaway coffee [3].

Despite this however, 57% of the UK don’t have life cover, while amazingly 11% of those surveyed don’t know whether they have cover or not!

But, did you know you can secure comprehensive life cover for less than 20p a day? What’s more the younger you are when you take out cover, the cheaper the premium.

Stay-at-home parents need protection too

You might think a life insurance policy is only required to protect the breadwinner. After all, they earn the money to pay the mortgage and all associated costs. Wrong.

We passionately believe it’s just as important to protect a stay-at-home mum or dad with life cover too.

Think about the far-reaching effects losing a stay-at-home parent would have, not just emotionally but financially too.

Common questions may include:

  • Who would run the home?
  • Would you have to cut back on your working hours?
  • What impact would this have on your salary?
  • Who would look after the children?
  • Could you afford expense childcare fees?
  • Who would take the children to school?

A study carried out by Bidvine[8] suggests the salary of a stay-at-home mum is valued at £80,000 a year.

Insurers payout 98% of claims, (not under 80%)

80% of people surveyed thought payout rates were less than 80%[4], however according to The Association of British Insurers, (ABI) (ABI) the official figure is 98%[5].

In a report from Pacific Life Re[1] when customers were asked why they think insurers decline claims, 58% answered ‘due to the policyholder not providing accurate information when they bought the policy.

17% replied, ‘insurance companies always try to avoid paying out‘ and a further 9% cited ‘loopholes‘ or ‘insurance companies being too profit driven in general‘ as key reasons.

Of the 2% of unsuccessful claims, the main reason given was non-disclosure, (sometimes referred to as misrepresentation). This means the details given during the application process by the policyholder were not 100% accurate and therefore the insurer declined the claim.

£263 billion cover gap in the UK

1 in 4 breadwinners [4] in the UK and almost 50% of parents[6] don’t have any life insurance. This results in an estimated cover gap of £263 billion[4].

It’s clear that many in the UK are unsure of the cost of life insurance or whether it even pays out on claims.

These common misconceptions could help explain why 8.5 million people are without any form of life cover[5].

Research published by SunLife suggests 47% of people have no idea how much life insurance costs‘. While ‘people overestimate the cost of insurance by 394%[7].

Be proactive – seize the day

We believe taking out life insurance to protect the financial future of your loved ones is a heroic act.

Unfortunately, there’s no reminder in the post prompting us to take out or renew life cover. Also, it’s not nice to dwell on what if I was no longer around – so many put it to one side, to deal with another day. The problem being you never know when you might need life insurance.

Now we have dispelled some of the common misconceptions surrounding life insurance, why not seize the day and secure cover?

Allowing you to get on with the more enjoyable things in life, like enjoying your children, secure in the knowledge, you have a reassuring safety net in place.


Sources:

[1] The Money Charity – http://themoneycharity.org.uk/money-statistics/51592/

[2] Money Advice Service – www.moneyadviceservice.org.uk/en/articles/how-much-does-a-funeral-cost

[3] LifeSearch – www.lifesearch.co.uk/health-wealth-happiness-2017

[4] Pacific Life Re – www.pacificlifere.com/content/dam/paclife_corp/pre/public/publications/pacific_momentoftruth_8pp_LOW.pdf

[5] Association of British Insurers (ABI) – https://www.abi.org.uk/

[6] Legal & General – www.legalandgeneral.com/life-cover/confused-about-life-cover/articles-and-guides/protection-life-insurance-poll.html

[7] SunLife – www.sunlife.co.uk/press-office/public-overestimate-price-of-life-insurance-by-almost-400-

[8] Bidvine – www.bidvine.com/blog/mum-salary/

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