Is Life Insurance Worth It?

Is Term Life Insurance Worth It?

Term Life Assurance is a type of life cover that pays out if you pass away within a set term. You choose this term at the policy’s outset (say 25 years) and if you pass away during that term your loved ones receive a payout.

Given Term Assurance lasts for a set period of time, it’s ideal for covering the span of a mortgage or providing cover to your family until your dependents are able to fend for themselves financially.

Having such support in place on yourself may seem the obvious thing to do if you’re the household breadwinner, but it should also be considered by both secondary wage earners and stay-at-home parents / partners.

Even if a non wage-earner passes away, you need to think about the impact it would have on the surviving partner. Would they have to pick up duties and responsibilities such as childcare and housekeeping? Or pay someone else to perform them while dealing with loss?

Such a situation could severely impact on their ability to earn a wage, so having a Life Insurance payout could make a significant difference.

Is Whole of Life Insurance Worth It?

Whole of Life Insurance is distinct from Term Insurance in that it is guaranteed to pay out when you die, whenever that may be, providing you’ve met all the required premium payments and haven’t breached the terms of the policy.

Given that the payout is effectively guaranteed, premiums are typically higher and the sums assured smaller than for Term Insurance.

Such policies are typically used to ensure there are funds available to pay for a funeral, but there can be other valid reasons. For example, a parent of a disabled child may look for a policy that can pay for care in future years as the child is never expected to become financially dependent.

Meanwhile, Whole of Life Insurance can also be used to pay an inheritance tax bill as this is something that will definitely arise at death. But potential customers need to be aware that there are numerous downsides to Whole of Life Insurance, and there may be more effective ways to leave money for after they’ve gone.

Do I Need Whole of Life Insurance?

While Whole of Life Insurance certainly has its uses, it may not always be worth it.

For example, “self-insuring” is a phrase used to describe retaining the money you would have paid out in insurance premiums and, putting the funds into savings and/or investments instead.

Whole of Life Insurance products are not savings or investment vehicles; inflation will erode the value of the guaranteed lump sum over time and there is no benefit from compound interest (interest paid on interest, a great boon to savers).

Depending on how long you live, you may well spend more in premiums than your beneficiaries ever receive as a payout with Whole of Life Cover, so you also need to consider that.

When comparing Term Insurance and Whole of Life Insurance, you’ll find that Whole of Life Assurance policies are generally more expensive than Term Insurance policies because the benefit is guaranteed. Payouts also tend to be smaller with Whole of Life cover.

Rauri Taylor
Independent Protection Specialist

Is Adding Critical Illness to Life Insurance Worth It?

Critical Illness Insurance extends the remit of your Life Insurance policy so that it will also pay out in the event of you becoming critically ill (as defined by the policy’s terms).

The most common claims on Critical Illness Cover are for cancer, heart attacks and strokes, but most policies will cover around 40 serious illnesses / injuries, including:

• Parkinson’s disease
• Multiple sclerosis
• Organ failure
• Total, irreversible blindness / deafness
• Loss of limbs
• Cardiomyopathy
• Removal of a lung
• Encephalitis
• Lupus
• Rheumatoid arthritis.

However, there are policies which cover fewer than five critical illnesses and those which cover more than 100, so it’s worth reading the terms and conditions carefully or getting an adviser’s help.

Adding Critical Illness Insurance to your life cover is another layer of complexity.

Critical Illness Cover is much more complicated than Life Insurance, with different policies covering different illnesses of different severities, so it’s essential you understand the cover you’re buying.

Samantha Haffenden-Angear
Independent Protection Specialist

Do I Need Critical Illness Cover?

While many people choose to combine Critical Illness and Life Insurance, especially if there’s a mortgage to protect, you may not always be best served by Critical Illness Cover when it comes to illness protection.

This is because the cover will only pay out in the event of a critical illness and only if that illness is of a severity specified in the policy.

Some of the most common reasons people are off work sick include, for example, mental health problems and musculoskeletal issues such as bad backs. Such conditions are by no means critical but would nonetheless keep you off work, potentially for quite a while. Yet because they’re not critical, you’d receive no payout from Critical Illness Insurance.

A more appropriate sickness insurance product for your needs may be Income Protection, which is designed to pay out a regular, monthly income (a proportion of your pre-tax earnings) if you can’t work for any medical reason.

Income Protection, because it’s paid monthly, can provide a more manageable way to keep your finances up together than one large lump sum from Critical Illness Insurance.

Ask your adviser whether Critical Illness Cover is worth adding to your Life Insurance or whether you’d potentially be better served by Income Protection.

Danny Gill
Independent Protection Specialist

Get Specialist Life Insurance Advice

If you’re still weighing up whether to take out Life Insurance, why not speak to an adviser?

Our specialists will take the time to get to know your situation, and discuss you whether Life Insurance is appropriate for your individual circumstances.

And if it’s right for you, it won’t cost you a penny to set up a policy through us. Our advice is fee-free, and as whole-of-market advisers, we can search all providers to find the most suitable product for your needs. Call 02084327333, email help@drewberry.co.uk, or compare quotes online to get started.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

• There is no fee for our service
• We are an award winning 🏆 independent insurance broker who works with all the leading UK insurers
• You’ll speak to a dedicated spcialist from start to finish
• We are very proud of the 4048 and growing independent client reviews rating us at 4.92 / 5
• Claims support when you need it most.
• We are authorised and regulated by the Financial Conduct Authority. You can find us on the financial services register here 🧐