Insurance is not for life – shop around

Philip Salter
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APART from taxes, there is nothing as certain as the grim reaper’s eventual scalp. It’s a depressing fact to contemplate on a Monday morning, but it must be faced at some time as it’s a vital consideration for anyone with dependants.

Ben Smaje, managing director at Kennedy Black Wealth Management says “the first thing you should assess is your need. In short, if you have dependants or obligations – be that debts or other commitments like school fees – life assurance is a must.” Smaje says “the second thing you should assess is how much cover you need.” He acknowledges that it may sound a little macabre but “you need to think through the implications of your death in detail and work out what lump sum or income would be needed to support your loved ones.” He is adamant: “Don’t try to scrimp on cover. Remember it’s going to be a very traumatic time for them.”

Jason Witcombe, director at Evolve Financial Planners, explains: “Many employers will offer four times salary as standard, but this could be wholly inadequate if you were the sole breadwinner with three children at private school.” He thinks you should try to visualise what sort of financial position you want your family to be left with in the event of your death and work backwards from that.

However, you should also contemplate the opposite. “Most people think about what happens if a breadwinner becomes ill or dies,” says Ian Dyall, advice policy manager at Towry, “but not what happens if a stay-at-home spouse dies or becomes ill, which impacts the breadwinner’s ability to earn due to taking on more roles.”

Peter Chadborn, director and adviser at Plan Money, says couples with children should consider two separate single life policies, as they’re often better than a joint policy. This is because if couples separate it’s sometimes not possible to split the policy with some insurers, while if tragedy strikes and both die, only one policy will pay out.

Loyalty doesn’t pay. “It’s particularly good to shop around this year, ahead of potential changes to insurance pricing,” says Simon Stanney, director of general insurance at He thinks “prices may rise this year: a European Court of Justice (ECJ) directive bars insurers from basing prices on gender.”

Closing a loophole used by the insurance industry towards an existing ECJ directive, the derogation from the general rule of unisex premiums and benefits will become invalid with effect from 21 December 2012 – outlawing gender-based premiums. Stanney also thinks changes to UK tax regulations may force insurers to pass on additional costs to consumers.

Knowing that your loved ones will be provided for in the event of a catastrophe should be a weight off your mind. And thinking about the end need not necessarily be a gloomy process. Tenzin Gyatso, better known as the Dalai Lama, contemplates his own physical demise every single day and he seems to be a happy chap.

Although the chances are His Holiness doesn’t go as far as to visualise paying taxes every day – transcendence from that particular Damoclean sword would be nothing short of nirvana.