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Life Insurance, myths busted

Wed 18 Oct 2023

Some people may think that life insurance is expensive, complicated and not for them. Here we shine a light on some of those common myths. 

Life insurance is expensive

Some life insurance payments can start from a surprisingly low amount. The amount you pay depends on lots of factors. Your age, health, family history and smoker status. It also depends on the type of insurance you choose.

Insurance companies don’t pay out to your family when you die

In 2022 over 95% of Royal London Term Life insurance claims were paid out to families at a difficult time in their lives. Despite this, there is still a misconception that insurance companies don’t pay out. Source: Royal London Protection Insurance claims paid (1 January to 31 December 2022)

Life insurance is a waste of money because you have to keep paying

Think of life insurance as a practical addition to a wider financial plan. Life cover typically starts immediately, and can offer some immediate protection against the financial impact of your death.

Term life insurance is purely a protection policy, so it doesn’t have a cash in value at any time throughout the term of the policy. So, if you stop making payments, you won’t get your money back. However, some life insurance providers offer payment holidays, so you may want to consider this if you still want to protect your family and your income has fallen or you're struggling to make your payments.

Applying for life insurance takes too long and is complicated

Some life insurance providers offer a life insurance calculator on their website. Usually, these calculators can generate a quick quote for you in a few minutes based on the information you provide. More than likely, the quote will be followed up by a call from the provider confirming your details and making sure you're able to make an informed decision. The length of this call varies from person to person.

You can't take out life insurance if you have a medical condition

Some life insurance plans may not ask you to declare any medical condition. However, just because you have a medical condition doesn't mean you can't take out life insurance. You can get cover designed specifically for people with diabetes, and other conditions can sometimes be accepted at an additional cost.

You don’t need life insurance if you’re single

Whether you need life insurance depends on your personal circumstances, your lifestyle and your priorities. It’s tempting to think that you don’t need life insurance if you’re single and without dependants. With the average cost of a funeral somewhere in four figures, when you die, the burden of that cost will fall on your next of kin. That’s why some people take out a small life insurance policy to cover their funeral.

I have to take out life insurance to get a mortgage

No, you don't. However, you may want to consider mortgage life insurance (also known as decreasing life cover), which helps to pay off an outstanding repayment mortgage when you die. A decreasing term policy typically costs less than a level term policy as the amount reduces over time. Your monthly payments to the policy will remain the same throughout the term.

Type of article: Articles
Category: Protecting my family

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