10 reasons to review your life insurance

10 reasons to review your life insurance

Premiums are based on age and health when you take out a policy. The premiums are then guaranteed for the life of the plan. 

 

You may be thinking, well I have got life insurance and the premiums are never going up, it will be more expensive to make changes now – what is the point of reviewing it? 

 

The policy documents may sit in a drawer somewhere and never to be looked at again until a claim needs to be made. Often people actually do not know where they are resulting in a conservative estimate of £2billions on unclaimed life insurance in the UK. Life insurance should always be placed in trust and recorded in a Will so that trustees are aware of your policies and your requirements for distribution following death. 

 

But it is so important to review your insurance from time to time particularly if there is a change in your financial or personal circumstances. 

 

There are many reasons why you should review your life insurance and we explore 10 of those reasons below: 

 

Mortgage 

If you purchase a new home or increase your mortgage debt then you should consider protecting the debt with life insurance. Should you pass away before the mortgage is repaid, the lender has a charge on your home so will require the mortgage to be repaid. Without appropriate life insurance in place, this could mean the home may need to be sold to repay the mortgage. You should ensure that the amount of cover and term is suitable to match a new mortgage. This doesn’t always mean cancelling an existing policy. Depending on your circumstances and current policy you may be able to top up the cover. Some life policies include a guaranteed insurability option which allows you to increase the sum assured without underwriting but subject to certain limits. 

 

Marriage 

If you have decided to build a life based on your joint income then you may have become dependent on each other to maintain your lifestyle. You may therefore wish to review or make changes to your life insurance to support each other in the event one of you dies. 

 

Divorce 

Unfortunately, things don’t always work out. When you get divorced you need to review your policies. You may have made your ex-spouse the beneficiary of your life cover. You may wish to consider changing the beneficiaries on your policy. If you have children together you may wish to make them the beneficiaries of your policy. If you have a joint policy, you should consider whether to keep this plan and who will pay for it or alternatively you may decide to replace it with individual plans. Some providers will allow a joint policy to be split into two without any additional underwriting. 

 

Starting or growing your family 

The average cost to raise a child to age 18 in the UK is £160,692 for a couple family or £193,801 for a single parent/guardian. Source LV.com/lifeinsurance/cost-of-raising-a-child A parent of children under 18 dies every 22 minutes in the UK; around 23,600 a year. This equates to around 111 children being bereaved of a parent every day. 1 in 29, 5-16 year olds has been bereaved of a parent or sibling – that’s a child in every average class. It a good time to review your cover to make sure that dependents are financially supported in event of your death. 

 

Debts 

When someone dies their debts become a liability on their estate. If no estate is left, then there is no money to pay off the debts so the debts will usually die with them unless they are secured against a property or asset. However if the debt is in a joint name the survivor will be liable. 

 

Occupation 

Changing jobs could affect your income. Your family may have got used to living on your higher income so increasing the financial impact of your death. You may have recently started your own business and no longer have the benefit of life insurance provided by an employer. You may have changed your occupation which can have a positive effect on premiums if your previous job was classed as a higher risk. If you now own a business, you could consider which policies can be expensed through the business. 

 

Changes in health 

If you were a smoker when you took out your life insurance policy, once you have not smoked or used any nicotine and tobacco replacement products in over 12 months, you can be described as a non-smoker on your policy. When you arranged your current policy, you may have had a recent medical condition, or been classed as overweight and these have resulted in an increased the premium. If you are now a non smoker, have lost weight or no longer have the medical condition, it could be worthwhile to review your policy. In addition, if you no longer participate in dangerous hobbies this could reduce the premiums. Likewise if your existing policy has some exclusions due to a medical condition when you took it out it could be worthwhile to review it with a view to getting the exclusions removed. 

 

Inheritance tax 

The current threshold for inheritance tax is £325,000 per person in 2022/23 with 40% tax applied on the value of your estate above this. Although there is no inheritance tax between spouses. If your Inheritance tax liability changes you may wish to review your current policies and top up with additional cover. 

 

Premiums are not competitive 

With the new focus on fitness and healthy lifestyles and improved survival rates for many illnesses some insurance providers have made pricing improvements. Although premiums are based on age and health when you start the plan, it is always worthwhile to speak to your adviser every couple of years to see if there have been any changes in premiums to your advantage. 

 

Valuable added benefits 

Many providers now include additional benefits available to the insured and sometimes family members. These can include health and wellbeing benefits such as physiotherapy, remote 24/7 GP service, fracture cover, hospital benefit, second medical opinion, expenses for overseas treatment if required to name a few. There is also a provider that will offer gym discounts, cinema tickets, discounts on shopping. If your current plan is not offering any additional benefits, it is worth reviewing to explore the additional benefits provided elsewhere that could be useful for you and your family. We do not charge a fee to review your policies and we can search the whole market to find the most suitable policies for you.

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