Life cover: don’t leave it too late

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MoneyPlus Features Team

28th February 2017 at 11:00am

It may seem that thinking about life cover and insurance in your 20s is a bit overkill, I mean why should you think of your death when your adult life is just beginning?

The reality is that sometimes things happen that make you take a step back and think, not only about the practicalities of having insurance, but about your life and the lives of those around you.

Recently, my father, who’s in his 40’s, had multiple strokes as a result of a heart condition that went undiagnosed for many years. This was a shock to the whole family, and after the seventh stroke the doctors decided to take the step to go ahead with open heart surgery.

Of course an operation of this type has too many risks to count as well as a lengthy recovery period. We also had to prepare ourselves for the possibility that we might never see him again.

Let’s look at this logically

Let’s put emotion to one side and look at this situation logically for a moment.

If my dad did not have life insurance to pay out if the worst was to happen, there would be a large financial void for the family. His income simply would not be there, not to mention funeral costs and all of the other costs which rack up in the event of a loved one’s death.

And, if he did not have critical illness cover to pay him a lump sum when he became chronically ill, there would be a huge financial hole as, post-surgery, he was advised that he could no longer work because of the effects of the operation.

Thankfully he did have this cover which helped ease the stresses of a post-surgery and post-stroke life.

But, why should I, or you, consider cover?

Now, I know what you must be thinking, surely this is a one in a million situation?

You’re probably assuming it will never happen to you.

But, remember, this all happened unexpectedly to a man in his 40s, in peak physical health.

What happened drained us all emotionally, as it was such a shock, but for me it also made me stop and think.

I saw how vital that critical illness pay out was. It meant my dad could focus on recovery, not money. And that was priceless.

So now I am fully covered. This may not be right for everyone, as we all have different circumstances.

So let’s take a broad look at the types of cover out there, to see what might be best for you.

Income protection

If you are taken ill and off long-term sick from your work, many companies only pay part of your salary for a certain time, and some will pay just the statutory minimum allowance from the government. Or perhaps you’re made redundant – out of the blue if you’re particularly unlucky.

This is where income protection can be a lifeline, as it pays you a guaranteed amount each month for a certain period, usually up to 50% of your previous salary or a lower percentage which you select.

As a young person with no dependants, but with rent and bills to pay, this type of protection is number one on my list.

This form of cover pays out until you can start working again, or until you retire, die or at the end of the policy term – whichever is sooner. It is also important to bear in mind that there is often a waiting period before the payments start.

To find out more about income protection take a look at money supermarket.

Critical illness cover

From my own experience, I think this type of cover is a great safety net to have.

If you have children to feed and mortgage payments to meet, a pay-out can go towards these costs and give you peace of mind. The payment is usually tax free and covers a range of different illnesses, and as money supermarket explains, can be a real lifeline;

“You can spend the money how you wish, so you could use it to clear any debts, pay for medical bills or to adapt your home to your particular needs. In other words, it can offer a financial lifeline in a time of crisis.”

I now have this in place, and it really has given me some security that I, like my dad, will have those funds desperately needed in the event of an unexpected, serious illness.

It is important to note that not all conditions are covered and the policy you choose will state how serious the condition must be.

Life assurance

I have life assurance cover through my employer, which is a multiple of my salary and pays out on the event of my death. But if your employer doesn’t provide cover, or if you want more, it is a great way to ensure your beneficiaries receive funds to pay off mortgages, debts or even to help with funeral costs.

Life assurance could be right for you if you have dependants who would be in need of the funds.

I am lucky that my employer already has a policy in place, but as a 23 year old without dependants and no mortgage, I see no need for me to race out and get further cover. For now, I am happy with the plan I have.

So, should you get cover?

Getting cover really is a no brainer. It gives you peace of mind and can be a low monthly cost for something that will be a real help if the worst were to happen.

For example, insurance might cost you around £20 per month. If we do the maths, 30 years’ worth of cover would set you back around £7,200. Now, this may seem like a lot, but if you think of it another way, would you be willing to pay £7,200 to have a healthy, critical illness free life? I know I would.

If you’re considering cover, make sure you take the time to shop around and get the best deal. There are various levels of cover available so make sure you take find the right one for you.

And as a 23 year old trying to sort her finances out, it is definitely part of my plan.