Protecting our loved ones’ financial future post COVID-19

Thankfully it seems like the worst of the COVID-19 pandemic is finally behind us, as family life returns to something resembling normal.

However, the devasting impact of the virus has made more and more parents consider how their family would cope financially if they were no longer around to provide.

This has led to a UK spike in life insurance applications, despite the current cost of living crisis squeezing household budgets.

But what actually is life insurance, why might we need it and what is the best way to secure the lowest price?

We asked award-winning broker Reassured, who compare the UKs best life insurance providers, to help answer the key questions…

family of 4

What is life insurance?
Life insurance is simply a financial safety net for a worst-case scenario.

The policyholder makes a monthly payment to receive the cover (known as the premium), sets the cover amount (the sum assured) and the length of the policy (the term).

Then, if you were to pass away during the policy term, a cash lump sum will be made to your loved ones.

The cost of life insurance is largely determined by the level of risk you pose to the insurer or put another way the likelihood of a claim. The greater the risk, the higher your premium.

As a result, factors such as your age, smoking status, medical history and sum assured all have a strong influence on the cost of cover.

The benefits of life insurance
Life insurance can actually be extremely cost-effective. If you are a young adult and a non-smoker you could arrange approximately £200,000 of cover from just 20p-a-day.

However, it is always a good idea to calculate exactly how much life insurance you require to ensure you do not take out either too little cover (potentially leaving your loved ones vulnerable) or too much cover (unnecessarily inflating your premiums).

The proceeds from a life insurance pay out are often used to clear a mortgage debt, (enabling the family to remain in their home), cover future living costs and household bills. However, they can be used as the beneficiaries wish.

How to buy life insurance
It is important to understand that the cost of life insurance can vary significantly between insurance providers, due to different underwriting processes. Therefore, it is vital to compare quotes from multiple insurers in order to identify your best available deal.

As mentioned above, there has been a rise in people considering life insurance for the very first time, especially amongst young parents who have children who rely on them.

But what is the best way to buy life insurance and how can you save money on your monthly premiums?

1. Source your own quotes
A good way of ensuring you compare multiple quotes from across the entire marketplace is to run your own research.

Some insurers will declare some prices online or provide a life insurance calculator feature, others you will need to call to receive the cost of cover.

Whilst this is a thorough approach, it is likely to be extremely time consuming and potentially frustrating too.

Also, if you are looking into life insurance for the first time you may not be familiar with all the insurance jargon or how the policy types differ and could require guidance. 

2. Use a comparison website
A popular method in more recent times is to use a reputable comparison website, such as comparethemarket or gocompare.

The main advantage of this method is that you can compare multiple insurers online any time of day or night. Usually there is no fee for buying a policy through a comparison site, as they make their money from earning a commission direct from the insurer.

However, one thing to consider is that these websites will never display quotes from every insurer, as some (like Direct Line) do not want to appear in their aggregated results. So, it is possible that there are much cheaper policies elsewhere which are not visible.

Lastly, depending on whether you opted in (intentionally or unintentionally) to their marketing communications, they may use your data to cross sell other insurance products, which may become tiresome.

3. Use an FCA-regulated brokerage
The final option is to use an FCA-regulated life insurance broker. A broker takes your specific criteria; budget, cover amount required, policy term length, medical history etc and sources a range of quotes from different insurers for your review.

There are two types of brokers; an advised brokerage who can suggest which policy they think best meets your criteria and non-advised; who simply take your information and present back to you the available policy options for you to consider.

The main advantage of using a brokerage is that they can offer a more personalised service.
  • For example, if you have a serious medical condition, they can use their impaired risk team or utilise their relationships with specialist insurers to find you adequate cover.
  • If you are having difficulty with the application, they can walk you through the process.
  • If you require information on how the various policy types differ, this can be thoroughly explained.
  • If you need help writing your life insurance in trust (to avoid 40% inheritance tax) they can do this for you.
Most brokers offer their services free of charge, again making their money through commission from the insurer. As a result, using the services of a broker could be a good option for many.

dad and child

Conclusion
As a parent thinking about how our partner and children would cope if we were no longer around is difficult to say the least. But that does not mean we should not answer these challenging questions.

Whilst never replacing a mum or dad, having life insurance in place can provide peace of mind that whatever the future may hold your loved ones are completely secure. What’s more, the younger you take out cover the cheaper it will be.

If you have people who rely on you, why not secure life insurance for years to come and get on with living life, safe in the knowledge your nearest and dearest are provisioned for.

* Collaborative post

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