If you’ve taken out a life insurance policy, it’s tempting to cross this important task off your ‘to do’ list, put the paperwork somewhere safe and forget all about it.
However, as the years pass, our lives change. Major milestones can often signal a need to review your protection policies. If you don’t review your cover from time to time, you could risk being under-insured, or be missing out on newer more cost-effective policies that might be better suited to your needs.
Firstly, it makes sense to look at how much debt you have. Over time this will change, meaning that you may not have sufficient cover in place, or even that you have more cover than you need. You also need to consider how much income your family would currently need to cover all their financial responsibilities if you were no longer around.
So, here are a few life stages when it often makes sense to talk about protection insurance with your adviser.
Getting married or entering a civil partnership
If you’ve decided to share your lives, the chances are that you’ll also be sharing your wealth and your household bills. This means that it’s important to make sure that if anything were to happen to either of you, there would be funds available to meet your financial commitments.
Moving to a bigger house
A larger home often means a bigger mortgage, so you need to consider taking out more protection insurance to cover the additional amount you’re borrowing. A mortgage is often a family’s biggest monthly outlay, so it’s important to have the right cover in place; no one would want to leave their family with financial worries at a time when they are coping with bereavement.
Having more children
If your family is growing, your financial responsibilities are likely to increase, and your cover will need to reflect this. It is often when families reach this stage that they find it’s appropriate to consider other forms of cover, such as accident, sickness and unemployment, critical illness or income protection.
You’ve gone up in the world
If you’ve received a salary increase or promotion, your lifestyle might have changed too. Your children may be in private school, and your family may have got used to expensive holidays and meals out. If that’s the case, then it might be time to increase your cover, so that if anything were to happen to you, they could continue to enjoy a good standard of living.
At this time in life, a protection policy can help in Inheritance Tax planning, providing a pay out on death that will help cover a tax liability on your estate.
As with all insurance policies, conditions and exclusions will apply.