Life insurance may not be at the top of many people’s ‘to do’ list, but arguably it’s one of the most important financial products anyone can take out, and one of the best ways of leaving loved ones provided for financially.
Life insurance doesn’t just pay a lump sum on death or (with a combined policy) the diagnosis of a critical illness, it can (with other add-ons or in ‘whole of life’ form) help provide an income for families hit by an accident, sickness and unemployment, help parents pass their wealth on to future generations and play a major role in inheritance tax planning too.
A recent study1 has shown that only around 26% of UK adults have any form of life insurance. What this figure means is that too many UK families are risking the consequences of life’s unexpected or unwelcome events. In the event of a death, diagnosis of a serious illness, accident or unemployment there would be no lump sum pay out or income payment from an insurance policy to fall back on.
WHY THIS IS SO
One reason given was a belief that insurance companies don’t pay up in the event of a claim. However, the most recent industry figures show that insurers pay out 97.2%2 of all claims. UK companies pay out over £10m every day on protection policies, including income protection, critical illness and life insurance. When they don’t pay out, it’s usually because of incorrect information having been provided by the policyholder when the policy was taken out.
Cost is often cited as a reason for not taking a policy. However, an analysis of premiums paid by respondents in the research shows an average life insurance policy premium of £21.28 per month for over £120,000 of cover. The average critical illness cover premium reported was £30.58 per month for over £71,500 of cover. This represents a relatively small outlay that could mean real peace of mind.
1Royal London, 2017