Life cover – something to consider in the age of COVID?

We are all familiar with the concept of insurance: all those of us who own a house or a car have house insurance and car insurance.  They are a necessary expense just in case the worst happens.  We may consider it a nuisance to have to spend money on something that may never give a pay back.  Indeed, we very much hope there will be no need for the insurance to pay out, but we don’t think twice about taking it out.  It’s a necessary evil.

Life insurance, however, seems, to fall into a different mental category.  Forgive me for raising the subject at what may seem a particularly insensitive time, but maybe we should be focusing our minds on the truth of our own mortality for the benefit of those who depend on us.

Whereas hopefully no one reading this article will crash their car, or burn their house down, as an accountant and a financial adviser I feel suitably qualified to quote Benjamin Franklin’s famous words that “in this world nothing can be said to be certain except death and taxes”.

Despite this, as a population, we are woefully unprepared for the certainty of death from an insurance perspective.  Some recent industry statistics noted that only 50% of households with a mortgage have life insurance in place. 

If the main breadwinner dies, the surviving partner may struggle to cope with a situation where they are required to continue to meet mortgage repayments on a much reduced household budget. 

If you are a company director, your company can pay the insurance premiums on your behalf, and obtain a corporation tax deduction on them, without your needing to report them on a P11d.  This cuts the effective cost (compared to paying the premiums out of after tax income) by 50% for a higher rate taxpayer.

The younger you are, the cheaper the premiums, and they are fixed for the remainder of the life cover period.  So if someone age 40 took out cover today, to last until age 65, the premiums would cost exactly the same each year for the next 25 years: though it’s also possible to elect to increase the cover in line with inflation each year (and the premiums would therefore increase accordingly).

If you are interested in taking out life cover, or finding out more about it, please do get in touch.

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