Life insurance can and has been miss-sold in my opinion. The sales targeted – commission leads sales people of the eighties certainly did not have the client’s best interest at heart. Who does need insurance? Well think about what would happen if you passed away? Who may suffer from your passing in terms of financial hardship?
If your single 25 reside at home with your parents it could be argued you do not need life cover. Why? Because in financial terms no one would suffer any hardship. Now – lets take a 27 year old man, married with three children (the youngest child is aged 4) – £180,000 19 year re-payment mortgage. Our Mr Example earns £43,000 per year his wife is the principle home-maker and takes the main responsibility for the day to day care of the three children.
Who would suffer financial hardship? All the family as the main income derives from Mr Example. In this case life cover would be needed to cover the repayment mortgage, the income that has been lost and a lump sum to help the children in the short and medium term. This could be child care and in the future educational needs (college funds).
A life portfolio could look like this:
1. £180,000 19 years Decreasing Term Policy to cover the mortgage.
2. £400,000 17 year term – to cover loss of income.
3. £150,000 17 year term policy for child trust funds.
Why 19 years? It runs with the term of the mortgage – Why 17 years? It would the youngest aged child to the age of 21. The portfolio looks at pure life polices only, critical illness and income protection would need to be considered to provide total protection.
When looking at your own life insurance think about who will suffer and how much cover do you need to replace the loss of income?