Life insurance is not a once in a life lifetime purchase
Posted on Friday 18th of September 2015.
Looking at old photos can highlight just how much a person's life can change over the years.
The tiny baby in its cot eventually becomes a fully-grown adult heading out into the big wide world and sooner or later many of those tiny babies will make tiny babies of their own. Births, deaths and marriages are the three major events in most people's lives and are often ideal points at which to make or review a financial plan.
Life insurance, by definition, is to help the people who are left behind.
Births are generally a time when good money-management skills show their worth as new babies place huge demands on the family finances. While making time to visit a financial adviser may not be the most exciting item on the agenda of parents-to-be, the sad fact is that death can happen at any time, even to younger people.
Ensuring that a child will grow up in financial security even after the loss of one or both parents is a key part of new parenthood. People who have already bought their own home may have taken out life insurance to pay off the mortgage and possibly an Inheritance Tax bill. This cover, however, may well be too low to cover the needs of raising a child to adulthood. Those without life insurance should generally look at the issue seriously upon the birth of a child.
Proud grandparents may also want to review their own provisions. Even if they are not assisting their children financially, they may well be providing free childcare, which would become an additional expense for the parents in the event of their death.
It may seem strange to look at life insurance after a death has taken place; however the death of a family member often brings about significant changes in family dynamics. For example a child may have to accept responsibilities which were formerly managed by a deceased parent. These responsibilities may be financial, but may also be practical such as helping a surviving spouse or civil partner with everyday tasks which may be too much for them. This then raises the question of how these responsibilities would be discharged in the event of the death of the child in question.
It's also worth noting that although transfers of assets between spouses/civil partners are generally free of Inheritance Tax, the death of the surviving party will trigger it. As life insurance can be a useful tool in inheritance planning, this could also be a good time to review it.
In days gone by life insurance was considered essential for men who were getting married in order to take care of their widows in the event of their deaths. Those days are long gone, but marriage remains a time when people buy homes together and these days those purchases are often made on the basis of joint incomes. Becoming a widow(er) is stressful even without having to worry about how to pay the mortgage. Having adequate life insurance cover can avoid adding financial worries to the grief of bereavement.