People’s attitudes towards something aren’t always rational or based in fact, but usually based on an emotional response. This is no different for many people’s attitude towards Life Insurance, and let’s face it, it’s something that would rarely come up as a hot topic at a dinner party.
The subject could be seen as morbid to many, as having to think about the unthinkable - is for many of us, unthinkable. However, if something terrible were to happen and you or a spouse were to pass away, it’s important that any potential financial hardship on you or your family wouldn’t make things even worse.
Recent industry studies have shown that homeowners with dependents aren’t taking out life insurance cover due to falsehoods regarding cover, cemented by many people considering even talking about the subject as a bit taboo.
Myth 1 - Life Insurance is ‘too expensive’
Whilst the cost of purchasing a policy is often cited as a factor preventing purchase for many, this is usually based more on perception rather than reality, as the cost of cover for many people often works out at just a few pence a day. When you consider this, many would have to agree that life insurance could actually be considered very good value for money.
Myth 2 - Insurers don’t pay out
Once again, data shows that this really isn’t the case as very few life insurance claims are denied. In fact, according to recent figures released by the ABI (Association of British Insurers) in 2019, 98.3% of protection claims were paid out.
Roshani Hill, The ABI’s Assistant Director for Head of Protection and Health stated:
“The high number of claims paid should give people confidence they can trust that their insurance provider will be there when they need them, helping families get back on their feet and providing valuable safety nets when the worst happens”.
The Association of British InsurersThe Association of British Insurers (News)
Myth 3 - You’re better off with savings
Many consumers still believe they’d be better protected with savings, regardless of the fact that in many cases, it wouldn’t be anywhere near what would be required to cover the costs of critical illness or death.
Having savings as extra protection is (in general) a good idea, as is working towards paying off whatever existing debts you may have, however it shouldn’t be considered a substitute for having life insurance cover in place.
Myth 4 - Your employer has your Life Insurance all sorted
Whilst any benefit like this is a smart move from your employer - you can’t always assume that the life cover you receive through work is adequate. Death in service benefit could certainly go towards helping your family, however it probably wouldn’t be enough to cover everything. It’s also worth noting that this cover will likely stop the moment you were to leave your company.
Myth 5 - You won’t get Life Insurance due to your health conditions
Different insurance companies each have their own guidelines for what can be underwritten. Some may be more lenient than others about particular health issues. So, shopping around is the best way to make sure you’re getting a good deal.
The two types of life insurance policies you’re most likely to come across are ‘term insurance’ (the more basic form of life insurance) and ‘whole-of-life’.
‘Term’ life insurance policies run for a fixed period of time (known as the ‘term’ of your policy) eg. 10, 15 or 25 years - and will pay out if you were to die during the term of the policy. There’s no survival lump sum payable at the end of the term. This type of policy tends to be purchased by those with (dependent) children and mortgages to pay.
With a ‘whole-of-life’ insurance policy, the clue is in the name (known as life assurance by many insurers). Unfortunately, we all die one day, so as this policy is ongoing, it will pay out a lump sum whenever that day comes. Naturally, these policies are typically more expensive than term insurance policies since as long as you keep paying your premiums, the insurer will always have to pay out, whereas you may outlive a term insurance policy.
This type of policy tends to be purchased by older people who may have children who are no longer dependants, or a mortgage to pay. One of the main benefits of whole-of-life insurance is that it can help your family deal with any bills associated with inheritance tax. It also may appeal to you if you’re determined to leave some form of inheritance to your loved ones, or if you want to help with your funeral costs.
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It can be difficult to navigate the industry jargon and range of options, but it really needn’t be that daunting. That’s where Cavendish can help. Whether you want to get a quote using our intuitive, step by step quote journey or over the phone - we’re here to help you find a cost effective life insurance policy that suits you.
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