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Life Insurance – what you should know

Many people may not think Life Insurance is important but ask yourself, if anything happens to you, can your wife, husband or partner, manage without your income? If the answer to that is no, then you should think about taking out Life Insurance. If you do, and do it right, you can be assured that should anything happen to one of your family’s income providers, your family will be able to cope financially, particularly when it comes to paying off your mortgage, paying for childcare and covering bills.

No matter whom you arrange your mortgage through, you will always be advised to take out Life Insurance and as probably the largest loan you will take out, it is important that any policy you choose covers the full amount and term of your mortgage.

However, you do have choices. If you have a repayment mortgage, you can consider one of the following options:

  • A policy where the insured amount reduces over the term of your policy to reflect your reducing mortgage, known as Decreasing Term Insurance.
  • A policy where the insured amount and premium does not change over the term of the policy which means the mortgage can be paid off and there will be money left over for your family to use as needed. This is known as Level Term Insurance.
  • A policy where the insured amount and the premium increases over time, either by a agreeing a fixed amount each year or by linking to the Retail Prices Index (RPI) measure of inflation. This is known as Increasing Term Insurance or an Indexation Policy.

It pays to get good advice about who to take out a policy with and to make sure that any other aspects of your life should be taken into account, e.g. the need for Income Protection if you’re self-employed, child cover for your children, Critical Illness Cover, etc.

If you use a broker for your mortgage, like Finance Expert Ltd, we will have a good knowledge of your circumstances and be able to advise you on the best option for Life Insurance. We will advise you that Life Insurance is advantageous and offer to supply you with suitable quotes based on our knowledge of your circumstances and any specific requirements you tell us about. Our policies may not be the cheapest but they are comprehensive. It’s your choice whether or not to take any of the options presented to you.

How much your eventual premium is will depend on completion of a full Insurance application which asks you questions about the following:

  • Your lifestyle; smoking and drinking habits, if you exercise
  • How your lifestyle may impact your Body Mass Index (BMI)
  • If you have a hazardous job or hobbies
  • If you travel a for your work and/or you visit countries where you are at a higher risk of contracting infectious diseases
  • If you have an underlying medical condition
  • Family medical history

How the Coronavirus (Covid-19) will affect insurance applications.  (Valid as at May 2020)

While in the midst of the pandemic, Insurers have amended and added to the questions they ask in their full application. These new questions focus on:

  • Travel to high/medium risk countries as identified by each insurer
  • Whether or not you have/have had symptoms and are self-isolating
  • Whether or not you are self-isolating due to a member of your household exhibiting symptoms
  • Whether or not you have been tested and the result of the test
  • Whether or not you have made a full recovery or tested negative

Your occupation may also impact on your application, particularly if you are, e.g. a Doctor, Nurse or Carer, etc. Depending on the responses you give, an insurer could defer the application for between 1 and 3 months. Moving forward, these questions will be incorporated into applications.

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