If the last year has taught us anything, it is that life can be very fragile. This fragility has led to an increase in people taking out life insurance to financially protect their loved ones no matter what the future holds.
But what is life insurance, why do most mums need it and how has COVID affected your ability to secure cover?
We asked the UK’s largest life insurance broker, Reassured, to run through the top considerations for mums at this challenging time.
Why life insurance?
Life insurance in simple terms is financial protection for your loved ones if you were no loved around to provide for your dependants.
You take out a policy and pay a premium each month in order to receive the cover. The cost of your monthly premium is calculated based on the level of risk you pose to the insurer, i.e., how likely a claim is to be made.
If you pass away within the term of the policy, a cash lump sum will be paid to your loved ones upon a claim.
A life insurance pay out is commonly used to repay the mortgage, cover family living costs, leave an inheritance, pay for child care or meet rising funeral costs.
You may think mums like you do not need life insurance, perhaps you are a stay-at-home mom and your partner is the so-called breadwinner.
But for a minute think about all the unpaid jobs you fulfil on a daily basis, (cook, cleaner, driver, shopper, school mentor, child minder etc) and then think about how your surviving partner would cover these roles if you were no longer around?
Full-time childcare alone costs more than £250 a week in the UK. In the US the average weekly childcare cost for one infant child is $565 for a nanny.
Maybe your partner would want to leave their job if anything were to happen to you? But then the family would lose their income. You can see why life insurance is so important for the majority of parents.
What’s more it is very cost-effective option, especially if you are young and healthy. You can get around £200,000 of cover from 20p-a-day.
The COVID-19 impact
The COVID-19 pandemic unfortunately has resulted in hundreds of thousands of fatalities, devastating so many families across the globe. This in turn has led to a significant spike in life insurance applications, as people seek to protect their loved ones financially whatever the future may hold.
But how has COVID impacted your ability to secure life insurance?
The answer is, at the time of writing this article, not much at all.
You can still secure life insurance, insurers are still paying out on claims and premium costs have been largely unaffected.
That said, there have been some changes to the application process with insurers now asking new COVID-19 specific questions, such as:
· Have you ever tested positive for COVID-19?
· Have you been in contact with anyone who has tested positive?
· Have you displayed any symptoms?
· Have you been required to self-isolate?
Even if you currently have Coronavirus, your life insurance application is still unlikely to be declined outright. It is more likely that your application will be postponed until you have made a full recovery.
So, now we understand how important life insurance protection is for the majority of mums and that COVID-19 is unlikely to affect your ability to get cover, what are the other key considerations?
Joint policy or two single policies?
When in a relationship where you may share a mortgage and car insurance, it may feel normal to take out a joint life insurance policy too – but is this the right option?
Well, in short, it depends.
The main benefit of joint cover is that it is approximately 25% cheaper compared with two separate policies and you pay one single premium.
However, if your budget allows taking out 2 single policies is generally more beneficial. Why? Because although you will pay two separate premiums, you can receive two separate pay outs, so effectively double the coverage. What’s more, having your own individual cover means even if your relationship breaks down you still have your own cover and do not have to cancel the policy.
Be wary of the free welcome gift
Most insurers use a free welcome gift as an incentive for you to take out a policy directly with them and not through a broker or comparison website. The free gift usually comes in the form of a shopping gift card worth between £50 – £100.
However, securing the most cost-effective monthly premium is the most important thing from a monetary perspective. Remember, a policy term can last up to 40 years so if your premium is even £1 a month dearer than it needs to be, this figure will dwarf the value of the free gift over time.
As a result, the most important thing is to make sure you compare multiple quotes, because the cost of your cover can vary wildly between providers, especially at this time.
Lastly, the most significant cost factor is still your age, the older you are the most you will pay. So, if you do not have life insurance, why not seize the day and secure cover, locking in a low premium for years to come.