Seeking advice on life and critical illness cover might not be top of your priorities, especially if you already have a mortgage or protection in place. You can, of course, arrange your own policies, or simply let the cover run that you set up with a mortgage adviser at the time you took out your mortgage. In a world where families are becoming increasingly dependent on two salaries, it might be time for you to seek some advice on your existing cover or, if you don’t have any, if you should have some in place.
Understanding the types of cover
There are several types of life insurance available. Taking advice could help you understand which type of cover best suits your current circumstances. Some examples of the types of cover available are:
- Level term cover: life insurance that pays out a defined sum if the policy holder passes away within the defined term
- Decreasing term cover: life insurance that pays out a lump sum if the policy holder passes away within the defined term, but the amount that would be paid out decreases as the term progresses
- Critical illness cover: insurance that pays out a lump sum if you are diagnosed with a serious health problem or terminal illness
- Whole of life: life insurance that pays out a lump sum upon your death, regardless of when you pass away
Knowing how these types of cover work and how they may or may not be suitable for your circumstances is really important. For example, a decreasing amount of cover might not be suitable if your mortgage is on an interest-only basis, as at some point during the policy term, the amount insured may no longer be enough. When you seek advice, your adviser might recommend a level term policy that will always cover the mortgaged amount until the mortgage term ends.
Understanding the level of cover
If you take out an insurance policy without taking advice, you may be paying for more cover than you need. For example, a level term policy might not be suitable if you only need the mortgage amount covering, and you’ve got a repayment mortgage. Without advice, you could also run the risk of not having enough cover. When you consider your annual earnings, and what it would mean to your family to try and cope without it, what initially seems like a large insured sum might only add up to a few years of your annual salary, when the reality is your family may need to cope for many more years.
Your life changes and so might your insurance
Lots of things change throughout our lives. You might get married, have children, have more children, increase your mortgage or pay some off. You can’t predict the future but you will get advice on the right cover for your circumstances at the time you take the policy. This doesn’t mean you don’t need to keep reviewing it; as things in your life change, you may need more or less cover. That’s why it’s not only important to seek advice when you take life cover, but it’s important to keep taking advice as time goes on and your circumstances change. You might discover more has changed since you took your policy than you realised.
If you’re thinking about taking out life cover to protect your family or reviewing your current cover, speaking to a mortgage and protection adviser is a good place to start. Get some advice from our mortgage advisers in Whitby today by calling 01947 859211 or sending us an e-mail.
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