Level Term Life Insurance News - protected.co.uk

This is a difficult question and one that most of us need to ask when considering how much life insurance cover to purchase. 

The answer will always be a combination of factors. 

You should be able to list how much your annual income is. If you receive bonuses, tips, commissions or overtime then you might have to estimate a figure based on previous years income. 

Some of that income may exist irrespective of whether you are alive or not. Banks automatically pay interest into accounts. Shares continue to pay dividends.  

So having identified how much income is relative to you staying alive, you then need to estimate how much living costs would be saved if you were dead.  There is the food you eat, the cloths you buy, transport and equipment directly related to your work. Any regular medical expenses you may have or opticians and dental check ups. Other costs that are special to you such as supporting your local football team or gym membership. 

You should be able to arrive at a figure which gives what you bring in and what is spent only on yourself. That will give you a net cash value you add each year to the family. 

Then there is the time you spend on DIY, looking after the car, cleaning the house, cooking meals, acting as home nurse, acting as taxi driver or just being with the children. You will no doubt be able to list many things that if you were not there to do them would no get done.  So how many things on that list are necessary and would need to be still done if you were not there. Out of that list how many would your family have to pay to be done. Try to add up an annual cost for paying for those items to be done. 

Now look at your debts. Each year you service those debts by paying interest and making regular monthly repayments. The annual service of debts should be covered by your income, but if you were to die then your creditors may expect immediate settlement of the outstanding debt.  That is not something you would normally expect to fund in any one year.  

Check how many of those debts already come with their own life insurance and how many are not covered by life insurance.  

You now have an amount you need to clear the outstanding debt amount. You have the amount the family would suffer if you were no longer earning less what you send on yourself. You also have the value of the time and effort you put in for the family.  

The amount to clear outstanding debts is a one off figure. The other two are on going.  So how long should you multiply then by?  There is no easy answer to this question. The answer will vary from one person to another. 

If you have children then they will probably need to be supported to at least their eighteenth birthday and possibly beyond. If you leave a partner it may depend on whether they are working. Even if they do work, does their work require you also to help out with the children? If you were not there then would that prohibit the kind of work they could do or the hours they could work.  You may think you need to cover your partner up to your or their retirement age. 

Whatever number of years you select then that is the figure you should multiply the two ongoing income/costs streams you need to cover.  

Add the above amount to the amount of outstanding debt and you come up with a starting figure to work on.  

You then need to consider if that is sufficient bearing in mind inflation and other factors. You may find the answer is much more simple. You just buy what life cover you can afford until you and your family feels comfortable.   

The author is Alan Knight who has more than 35 years of experience working in the life insurance sector.   

This article does not represent ‘financial advice’ as each person’s individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase any product or service.

The views in this article represent those of the author and not those of Netbasic Limited.

The life insurance companies purchase actuarial tables. These are tables produced from various groups of the population and they list down how many people within a given age group died over a twelve month period.

The general rule is that those in a young age group have less chance of dying and those in a mature age group have a much greater chance of dying.

The insurance company will always try to use actuarial tables which match as close as possible the type of insurance they will have on their books or the type of insured they are hoping to insure going forward.

Age alone is not the only probability. Women general live to an older age then men. People in certain jobs or more exposed to serious work injuries. People in some jobs are more exposed to health risks such as high blood pressure.

Weight and smoking also play an important part in calculating our probability of death.

So the insurance company will select the factors they consider to be the most important and use those to calculate a base risk rate. The base risk rate is the premium rate required just to cover the basic risk before any additional factors are added. Insurance companies need to be commercial in regard to the number of question they can ask us. Who wants to complete a proposal form which is a hundred questions long?

Now we do not all purchase the same sum insured. Some of us want high levels of life cover and other are willing to accept lower levels of cover. Insurance companies need to balance their portfolio of business and therefore they may apply additional loadings to make cover less attractive for some areas and apply lower loading in other areas to make cover more attractive. This will help the insurer balance their portfolio.

If a person wants very high cover then the insurer may purchase reinsurance. That is a form of insurance taken out by insurance companies where they spread the very large risks with other insurance companies. That ability comes at a cost which may mean a load for the higher sums insured.

The insurance company can get the best feel for any risk by having either a medical questionnaire completed or a medical report done.  Both of these cost time and money. So insurers will often only require these to be done if the major risk factors indicate that other risks may exist (heavy smoking or excessive over weight) or if the sum insured is high. Under those circumstances the insurance company can justify the additional cost.

Once the insurance company has worked out the actual risk premium they then need to add the cost of acquiring the business, whether this is commission to an agent or the cost of advertising or their own front of shop staff. Then there is the cost of issuing the policy documentation and premium collection.

When insures get the premium in they will invest it. The insurers may get many years investment income before they are called upon to pay a claim. The insurers can consider whether they will earn enough in investment income to allow a reduction in premium rate.

When all the above has been done the insurer needs to add a margin for profit and safety.

These calculations are done by very skilled staff called actuaries. The calculations are done on a regular basis to that the funds the insurers retain to pay future claims are held at a sufficient level.

The insurer must also take into account if the policy offers any additional cover extensions such as joint life cover, terminal illness or critical illness.  

The author is Alan Knight who has over 35 years of experience in the financial and life insurance industries.  

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase any product or service.

The views in this article represent those of the author and not those of Netbasic Limited.

Stay-at-home-mothers still need life insurance

The decision to leave the workforce and become a full-time mother is often a hard one for women to make, and can also have very costly consequences if the right precautions are not taken.  Sometimes life insurance cover just doesn't seem to be a priority.

There is a significant financial risk posed to stay-at-home-mothers due to their loss of income. Although most women leave the workforce intending to return to it later on, few realise how circumscribed their chances of re-entry will be, or what a steep financial price they will pay for their time out.

This information gap is so dramatic that women often make these crucial life choices in virtual ignorance of the long-term consequences. But the unfortunate truth is that most of these women will be blind-sided by painful challenges in the years to come.

Half of them will get divorced; others will have to cope with a spouse’s illness, incapacitation or premature death. Then there’s unemployment and if the second parent should lose their job at some point it could have a catastrophic effect when they are the family’s only breadwinner.

When you add up all the risks, it becomes clear that most women who relinquish their financial independence by quitting work will eventually find themselves on the wrong side of the odds. The consequences for them and their children could be enormous.

According to a new report from a leading insurer in life insurance, the value of a mother’s work in the home has doubled over the last 25 years to an average of £24,456 per year.

The study from a leading university shows that if a mother was paid for her work, she would earn £2,500 more than the average starting salary for a graduate.  Women would have to be paid £470 per week to cover the 66 hours of chores they complete, almost double the amount men manage (34 hours).

Most people underestimate the cost of a mother's weekly worth which has led to under-insurance among British families as only 25 per cent of men and 17 per cent of women have insured their own lives through life insurance.

The financial value of a mother’s work in the home is often undervalued, especially when it comes to ensuring a family could cope financially if a parent died.

The research aims to highlight the need for family protection, as many people do not realise that in some cases for as little as £6 a month, you could buy yourself around £100,000 of life cover.

It is almost more important to cover yourself with life insurance should you become a stay-at-home-mother because there are minors depending on you. Even though you may have no income to protect, your spouse could find the added cost of paying someone to look after the house and children a financial burden.

Should something happen when are working as a full-time mother and you are on only one salary, you could find it very hard to get by during any grieving period or added costs of childcare, schooling and general maintenance. This is why it is worth having some degree of Income Payment Protection.

Income Payment Protection is an insurance contract that will pay a monthly income if you cannot work usually due to accident or sickness.

There are two forms of Income Payment Protection: Long Term and Short Term. A short term plan will pay a monthly benefit upon receipt of a valid claim for a maximum of 12 months (some companies offer 24 months), where a long term plan can pay a claim up until your selected retirement age (50-70).

Both life insurance and income protection are invaluable when you have dependants and most likely the financial burden of a mortgage and other loans and credit cards and under estimated the value of a stay-at-home-parent could be a costly mistake should something happen.

The author is Melinda Varley who an experienced journalist currently specializing in articles for the financial field. Melinda has held several positions for magazines and newspapers both hard copy and online and both in the UK and Australia which is where she originates from.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in this article which you which to rely on then please check those details with any person from whom you purchase a life insurance policy.

The views in this article represent those of the author and not those of Netbasic Limited.

How checking your life cover could save you in the long run

A worrying number of people are risking invalidating their life insurance by failing to inform their insurer about changes to their circumstances, such as moving house or having children.

According to research from the Association of British Insurers, one third of Brits have not updated their life insurance cover in the last five years and people who do not regularly check their policy could be left dangerously underinsured.

When you've got a change in circumstance you've more than likely got to change your level of life insurance.

People who don’t update their insurance details with their providers may eventually find that when they make a claim it can be refused as the insurer can penalise customers for not divulging their full circumstances.

Consumers should tell their providers of any changes including minor health problems that have surfaced, hospital visits, family history of hereditary illnesses or cancer, pregnancy as well as change of income, marital and employment status.

In some circumstance it may also be cheaper to change your life insurance policy as your circumstances change, either for the better or worse.

The cost of life cover has been reducing quite frequently over the last few years and updating your policy doesn’t necessarily mean that you will end up paying more.

Life insurance customers that are worried about their premiums rising as a result of changed circumstances should make sure they shop around for the best value product, switching insurer if necessary.

Life insurance policy’s are usually taken out quiet early in our lives, around the time of marriage, therefore some where down the line you may wish to switch providers in order for a better deal.

Some experts say that Brits should look into securing a life insurance policy earlier in life so that they can invest effectively for the future.

If consumers begin saving earlier, for example men aged between 35 and 42 who are the most likely age group to apply for life insurance, could find themselves paying less for insurance in the future.

People in their early 20s are also deemed as a good age to begin setting aside funds for insurance as are those with debts, mortgages or those who are self-employed.

However, life insurance is certainly not a top priority for most people in their twenties but, if you take a look at the cost you'll see that it pays to start buying a policy as early as possible where there is a genuine need.

Furthermore, if you do decide to take out a life insurance policy early in life, you can then switch to a better deal should one become available later in life more easily as you’ll have proven insurability.

There are currently many life insurance companies that have considerably reduced their premiums over the last few years to take account of longer life expectancy and the advances in medicine.

If there has been no deterioration in your health and as long as your policy is pure protection rather than an endowment or other form of investment product then it could be worth getting a quote.

However, you should not cancel any existing policies until you have been accepted by a new company and your new policy is in full force.

What agents typically do in a change like this is take the cash value of the current life policy and use that to buy more insurance or obtain a new policy.

Before replacing your life insurance policy, it is best to first assess your needs and decide what will be the best decision for you long term, including what is best for the one's you are protecting.

The author is Melinda Varley who an experienced journalist currently specializing in articles for the financial field. Melinda has held several positions for magazines and newspapers both hard copy and online and both in the UK and Australia which is where she originates from.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life insurance policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.