Financial Health
I have been busy sorting out my financial health. Part one began in May by sorting out my income protection insurance which I wrote about here. Finally, I feel secure that I have income protection if I am unable to work due to health reasons. Then part two, in June, I wrote my will, which I wrote about here.
Part three of my financial overhaul has been to sort out my life insurance. I am on a roll. Soon I am going to financially stable, soon, not quite yet!
What is life insurance?
Life Insurance is a VERY important insurance policy that will pay out to your nominated family/dependants upon your death. It is often linked to the value of something big that you owe, like an outstanding mortgage. The policy might be the same length in years as your outstanding mortgage and cover the amount outstanding on your mortgage at a point in time. Or it might be a nominal amount that you want to leave to dependants if you die.
For example, you own a house worth £300k, with £150k left to repay on the mortgage. A nice position to be in with 50% of the value of the house owned and 50% left to repay. The remaining years on the mortgage might be 20 years. You could take a life insurance policy for £150k for 20 years. If you did die the mortgage would be paid in full and the beneficiaries in the will would receive the house mortgage free.
You can leave the beneficiary details in your will, or in the details of the life insurance policy.
Death in Service
You might also have a death in service policy as part of your employed benefits (find out more about this cover here). This is an amount of money linked to your salary that will pay out if you die during your employment. I have had this benefit a few times with employers it was normally 3-4 times my gross basic salary.
My situation
As with a few other financial things currently, I hadn’t quite got my life insurance right. The last time I reviewed my life insurance was 2009, ten years ago. I started the process to get new life insurance in May 2019.
I have a policy dating back to 2001 which I took out when I bought my first house with my partner at the time. Tis was taken out at age 24 and it was good value, just £6 a month and I never looked at it again. Upon investigation this policy is worth £107k and will expire in 2026. It was taken out to match the 25-year term of my mortgage from 2001.
I took out an additional policy in 2009 with a different insurance provider when I bought my current house. Again, with an insurance value of £100k and lasts until 2029. This one is £16 a month, and I am not sure this is great value for money.
My issue is that I have £200k outstanding on my mortgage so my life insurance position was feeling a bit tight. Only just enough to cover the outstanding mortgage, certainly not enough time wise to cover the 22 outstanding years I have on my mortgage. Also, I am self-employed, running Mrs Mummypenny, so have no death in service benefits.
Getting Help with my Life Insurance Requirements
I felt like I needed to top up my life insurance. I spent some time on the telephone with my adviser at Drewberry Insurance who went through my situation and made some recommendations on what I needed life insurance wise.
We decided together to treat my older policies as bonus policies, to keep paying the monthly premiums. But to set up a new policy for £200k to cover my outstanding mortgage for the 22 years remaining on my mortgage.
Medical disclosures
Once my advisor had an idea of my insurance requirements we went through some detailed medical history. Firstly, I had to disclose every noteworthy illness I have ever had. This included any time off employed work for any illness in the past five years. I also had to disclose any mental health problems in my life. There was a diagnosis of Seasonal Affective disorder back in 2007 so this went into my application. Also had to disclose my low platelets, ITP disorder.
I shared my weight, height, alcohol consumption and smoking status. I also had to share details of any close family members who had serious illness or death before the age of 65. This included both of my parents who died of heart disease at 58 and 63. I also had to disclose my brother who had a stroke at the age of 57, whom survived.
All this disclosed information did limit the companies that would give me life insurance as well as the premium that I was to pay. Every life insurance policy is different, but it is important to disclose every bit of medical history to ensure that if the worst happened and a claim was made it would be paid out.
Further information Required
A policy was found for me with a reasonable monthly cost, of around £15 per month. But before I was accepted the insurance company required a medical report from my doctors. This is where things slow down a bit.
The insurance company wanted more details about my low platelets. This is a disorder that rarely affects my life. I bruise easily and bleed a bit more than normal folk. Not much else happens as a result of low platelets. But the insurance company needed a report and asked my GP’s surgery for this.
This has caused a slight delay awaiting the medical report from the doctors, I kept popping into the surgery to ensure it was being done!
Eventually in July the medical report was received back by the life insurance company and the policy was set up two months after the application started.
Life Insurance is now Fixed
I am now in a position where I have a decent amount of life insurance for the next 22 years. I have my two old policies plus my new one and I know that if the worst was to happen my children will have their house paid for and will have extra money as well to help with life. The feeling of security is amazing, difficult to put a value on, but it certainly feels good.
Thank you Drewberry for making the process as pain free as possible.
This is a collaborative post with Drewberry.
