Six reasons to re-think your life insurance

More than 40% of us forget to update our insurance cover when we experience life-changing events - but failing to do so could leave you and your loved-ones without the protection you need. Laura Starkey explains six reasons to review your life insurance.

Let’s face it: life insurance isn’t something most of us want to think about frequently. Aside from its obvious, somewhat depressing connotations, it’s hardly the stuff of sparkling conversation.

However, a recent report from Barclays Financial Planning shows that, despite our reluctance to discuss them, protection policies such as life insurance aren’t products we should buy once and never think about again.

According to Barclays’ research, 42% of people with protection policies have experienced at least one life-changing event since buying or reviewing their insurance. This means that, although they think they are protected, they might not have adequate cover for themselves and their families.

Reviewing the situation
As people move through life, their circumstances - and therefore their insurance needs - can shift dramatically.

If you experience major changes, such as those I outline below, it’s a good idea to re-think the level of life insurance cover you have, and perhaps consider increasing it.

1. You take out a joint mortgage
When you buy your first property, it’s likely your mortgage lender will impress upon you the need to purchase some form of life insurance. This is because the bank or building society will want an assurance that, if you die, your mortgage will be repaid in full.

If you buy a home with a partner, it’s even more important to ensure you have enough protection in place to cover your share of the mortgage debt.

If you don’t, your other half (or housemate) could end up being pursued for the entire joint mortgage, should the worst happen.

2. You get married or enter into a civil partnership
When you make the commitment to spend your life with someone else, it’s likely this will also mean you spend your money jointly.

Entwining your finances with a partner’s can affect the level of life insurance cover you need.

If you rely on pooling joint incomes to pay your household bills, it’s important to ensure both partners’ contributions to the family finances are properly protected. Otherwise, should one of you pass away, the person left behind is likely to experience money worries as well as heartache.

3. You have children
According to Liverpool Victoria, raising a child from birth to the age of 21 can cost as much as £194,000. That’s equivalent to a staggering £25 a day!

Even if both parents in a family work, costs like these can be difficult to cover.

However, if one of the incomes you rely on was lost, the right life insurance cover could make a real difference to the surviving partner or loved ones left to bring up your family.

Also, don’t forget to review your life insurance needs as your family grows. Looking after a family of three or four children will cost significantly more than meeting the needs of an only child.

4. You have other, non-mortgage debts
If you have outstanding borrowing on personal loans and credit cards, it’s important to understand that these will have to be repaid out of your estate (the wealth you leave behind) when you die.

It’s a good idea to ensure you have enough life insurance in place to cover such debts, especially if you have dependants who rely on your income to survive. If you don’t, your family will have to deal with your creditors after you’ve gone.

5. You get a new job
If you’re lucky enough to be offered a new job and an increased salary, you may need to increase your life insurance cover.

This sounds contrary, and it’s easy to assume being better off might mean you would need less, not more, life insurance - but remember, most people become accustomed to the lifestyles they lead.

If a career move means the start of a more affluent standard of living for you and your family, it is worth considering how they would maintain this if your income was lost.

Also, it’s worth checking the terms and conditions of any new employment contract you sign. Some jobs offer death in service benefits (cash payouts for your loved ones which your company will make if you die while employed) - but others do not.

6. You stop working
If you or your partner decides to give up work - for instance, to look after a young family - it’s important to consider how this could affect your life insurance needs. Again, this might seem strange: after all, if you’re able to survive on just one income, why would you need more life insurance?

The answer is that the household contributions of an unpaid nanny/chef/cleaner/all-round super-hero wouldn’t come cheap if you had to start paying for them!

The cost of meeting necessary expenses such as childcare could be steep, should the person who usually does this work pass away. Therefore, it’s well worth working out whether you need to build in extra life insurance cover to account for them.

The right cover at the right price
Finding the right life insurance isn’t straightforward. Remember, it’s as easy to be over-insured as it is to be under-insured - and it’s crucial to find a policy that will balance your need for cover with a premium you can afford.

For this reason, it’s a good idea to seek independent, personal advice before choosing a life insurance product. BeatThatQuote.com’s life insurance service could help you compare a range of policies, and assist you in making the right decision.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**