Marty Naan talks all about life insurance.
What is life insurance and why do we need it?
Life insurance is quite simply a gift that provides for someone in the event of your death. It’s about making sure that somebody has the ability to cope financially if you pass away. It’s an insurance that pays out a large sum of money to your beneficiaries – or even a regular monthly amount – in the event of your death.
Why is life insurance so important?
Everybody has different circumstances and goals in life, and has different ideas about what they want to get out of protection. But to be blunt about it, if a family can access funds after the breadwinner passes away, that could be an absolute lifeline.
Imagine a couple with a joint mortgage and one of them passes away. Now, there’s only one income. Maybe that mortgage becomes unaffordable and the house has to be sold. Maybe a whole family has to find somewhere new to live.
It starts a downward spiral of tragedy where a lot of sacrifices will have to be made to accommodate just one income, especially if you’re used to joint earnings.
All of those problems can potentially be eliminated with a simple life insurance policy. That’s why it’s so important – because it provides people with options and solutions. It’s not so easy to find £50,000 or £100,000 when you need it urgently, and it’s definitely not easy to save that amount. But instead you might have an insurance policy. It doesn’t help with the emotional loss, but it can absolutely help with financial loss.
Is life insurance worth getting?
Absolutely. But it is dependent on somebody’s circumstances. It’s definitely appropriate if you have dependents, if you have a family to keep safe and cared for should something happen to you.
However, if you’re single with no dependents it might not be the best choice. There are other types of protection that will suit you better. It really comes down to somebody’s individual circumstances.
Am I eligible to apply for life insurance?
I’ve done detailed research on this and I’m going to actually read out a definition of eligibility from one of the insurance providers that I work with.
It says, “You are eligible for life cover if you’re over 17 and you’re under 70.” That’s it. That’s the eligibility criteria for life insurance. How simple is that? So the vast majority of people that I speak to are eligible for life insurance.
How much life insurance do I need?
There isn’t a generic one-size-fits-all answer for that. When I provide life insurance it’s based on a complete review of a client’s needs and circumstances. We have to go through a lot of things to make sure what we’re doing is right for that particular person.
There are some typical examples, though. Often people want life insurance related to their mortgage, to pay it off should one of the owners pass away. In that case, the life insurance should match the mortgage in terms of the amount and the length of the policy.
But it’s not just mortgage related. You can have life insurance regardless of your circumstances as long as it’s affordable. Maybe you want to protect your family so the mortgage is taken care of, plus provide additional funds for them. That’s what an advisor does for you. We would look through circumstances and figure out how much the family might need, and also how long for.
There are minimum terms for life insurance – five years is typical. Some clients want to look after their families until the kids are financially independent. If you had a five year old, for example, who will theoretically be financially dependent at 25, you might choose a 20 year term.
It’s all very bespoke. We can tailor these things to suit all circumstances. So sitting down with an advisor to go through your actual needs is absolutely the best thing that you can do – there is a solution for everybody.
What costs are involved with life insurance?
That’s probably the first thing people think about – how much is this going to cost me? And again, it’s not the easiest thing to answer. We always take your budget into account.
Actually setting up life insurance is free – there’s no cost for putting the policy in place. It’s the monthly premiums that people worry about. Like any insurance policy there is going to be some kind of cost, but of the main protection types, life insurance tends to actually be the cheapest. And, to put it another way, the cost of not having that protection could be massive.
What we do is start by asking you how much you can afford and base it on that. If somebody says they can afford £20 per month, we’ll find a level of protection for that amount.
We always apply protection to your specific circumstances and budget. It’s always better to have something rather than nothing.
What if I have pre-existing medical conditions?
Policy providers are aware that people have pre-existing conditions and they actually take these into account today. They might still be able to insure somebody. It might cost a little bit more, because of the risk that the policy provider has taken – or they might exclude certain types of conditions.
The point is that you might still be able to get cover and as we said earlier, some cover is better than no cover. The biggest issue is that it could come at an extra cost, but I prefer people not to start worrying about that before they even have the details.
It’s better to actually get started on a life insurance application. It will tell us more about what can and can’t be covered. Don’t just exclude yourself from the process because of something you might be worried about – we let the provider take over and answer those questions. They will give us some options on the cover instead of worrying about it and not doing anything at all.
What else do we need to know about life insurance?
Leaving all the logic behind and looking at emotion here, life insurance isn’t about you. I’m speaking to everybody on a singular level when I say that. It’s not about you – it’s about what you can do for the loved ones that you leave behind.
It’s a difficult thing to think about and a difficult conversation to have, because we’re not expecting people to pass away. People don’t want to talk about death. But when we have those difficult conversations, we’re doing it to come up with a solution.
That’s much better than a difficult conversation with an impossible conclusion – a scenario where somebody has no money and has to do the things that we talked about like selling their property. We do have difficult conversations, but only because we want proper solutions that will look after people when they need it most.
Your home may be repossessed if you do not keep up with your mortgage repayments.