You have decided you want life assurance. Or you have life assurance but want to review it or upgrade the amount of cover.
The best thing to do is to go online and shop around, like you might do for your car insurance, right?
Well no, this is not a shopping exercise. Yes, life assurance is a cost driven ‘product’ in some respects, but there is much more to this than just finding the cheapest option.
For starters, and this is a BIG aspect, how much cover do you need? What do you need it for?
These simple questions are not as simple as they may appear. The amount of cover is surprisingly difficult to quantify in many cases.
Typically people want life assurance to look after their family and loved ones in the event of their untimely death. But what does look after mean? A 45 year old with a spouse and three kids has to calculate lifetime expenses and discount these back to get to a replacement income figure, this calculation may have to make allowances for different tax positions and also other factors, such as mortgage payments (the mortgage may or may not be paid off on death) and then translate this into a suitable amount of cover.
Then, once calculated in some way, should the cover be a lump sum or a regular income payable to the family.
With a mortgage what sort of cover would be appropriate, an interest-only mortgage probably needs to be covered by a level term assurance plan, a capital repayment mortgage by a decreasing term assurance plan.
How do you know what life assurance you need and how to structure it?
A COCKTAIL OF FACTORS
Also you may have multiple needs, to pay off the mortgage, other borrowings or long-term commitments, provide for your beneficiaries and also take care of business affairs (if you are In Business in some way).
You may want to avoid unnecessary taxes, oh and you may want to think about what happens if you get a serious illness such as cancer which you have to deal with financially and in other ways, but which, hopefully, you will survive. In that case you may decide to build in critical illness cover to your plans, but should this be within one plan with your life assurance, or separate?
How much critical illness cover should you have?
Also if you are a couple how do you decide whether to have joint policies or separate policies?
What about if you have been divorced, have remarried and have kids from past marriages in the equation? Or you want the pay-out from your life assurance to be protected against future divorces of your beneficiaries, so your life cover does not end up with your son’s ex-wife’s new husband?
Reading all of the above, try plugging all that into an online life assurance quotation system!
Not only is cheapest not necessarily the best, but also the structure of your PROTECTION plans which is more just than life assurance, as critical illness cover and income protection, medical expenses and much more needs to be factored in, has to be managed. The structure is all-important and can mean that what looks cheapest today, is nothing of the sort long-term.
This is where advice comes in because an independent financial adviser can provide the steer to what is the most suitable structure based on your circumstances, requirements and wishes.
And because they are independent, they can find the most suitable policies from the market as they are not restricted in any way by a panel of companies or one particular company.