With the recession showing no sign of abating and economic prospects about as gloomy as they’ve ever been – to say nothing of the chaos in Europe – we’re all worrying about money and, in particular, how we can save money.
You wouldn’t be human if you didn’t run your eye down your bank statement, see the name of an insurance company and think, ‘Is that what I’m paying for life cover? Do I really need to spend that amount? After all, I’m feeling fine…’
My client Roy was feeling fine as well. Everything in the garden was rosy: he had a successful carpet business which he was going to sell in a few years’ time. By then his children would have left home: Roy and Denise were going to buy a mobile home and travel round Europe. “Exactly what I should have done thirty years ago,” he told me.
One Friday night Roy went to the pub. It had been a stressful week – some suppliers hadn’t delivered on a big contract – and he needed a drink. He needed to unwind. Unfortunately, Roy had a heart attack. He died on his way to hospital.
Roy was in his mid-fifties – but as anyone who follows football will know, heart problems can strike the fittest people at any age. And we all know someone who’s had cancer, or someone who’s been in a car accident.
Yes, it can be tempting to think you don’t need your protection policies – but dying without life cover in place can have a devastating effect on those you leave behind. So how much life cover do you need?
In the old days it was simple: your insurance agent would cycle round and tell you that between ten and twenty times salary was the ideal figure for life cover. Today, it’s slightly more complicated, especially as many of us have death-in-service benefits and/or partners that work. But everyone needs to make sure that their mortgage is covered; that their children’s educational needs – school or university – are provided for and that bills and funeral expenses are taken care of.
This is where a relationship with a good independent financial adviser comes into its own. Working these sums out for yourself can be a painstaking and depressing business. Your IFA will not only be able to do the calculations for you (and take things like death-in-service benefits into account) he or she will also be able to find you the most cost-effective cover. In addition, he’ll advise you on other specialist considerations. For example, does your life cover need writing in trust for your dependants?
You may also be pleasantly surprised: life cover is not as expensive as many people think and it’s often the case that clients are paying more than they need to. Rates have fallen over the past few years and many existing policies could now be replaced with more economical ones.
Sadly none of us know what’s round the corner: but speaking to your Financial Planner or IFA can at least guarantee that if the worst happens your dependants will be financially secure.
As always, we’ll be happy to discuss all aspects of your life cover with you as part of your overall financial plan and answer your questions.