A New Dads Guide To Life Insurance
Let's be honest, death is not a subject people like to talk about but the one thing that is certain in life is that you are going to die. What you don't know is when! Having got married in my early twenties and my wife proudly breaking the news to me a couple of years later that she was expecting our first child, it was at that point we sat down and thought about the financial implications if I were to be killed in a car crash. We quickly came to the conclusion that I needed extra cover, in particular life insurance aimed at dads.
This was despite the fact that I worked for a major clearing bank in London and was fortunate to have a number of employee perks such as a company pension scheme, private health cover and death in service benefit that would provide a lump sum of 4 x salary and a widows/dependents pension upon my demise. Let's not forget that there are an awful lot of people these days who work for an employer who does not provide life cover for their staff and there are an increasing number of people who are self-employed who would have to make their own life insurance arrangements.
So, what was the rationale that led to me arranging some more life cover?
Well, there were a number of reasons:
The mortgage was in my name that I had taken out when I was single so I had not bothered to arrange any life cover to pay the mortgage off should I die as the property could have been sold to liquidate the borrowing. However, now my wife was living in the property, it made sense to sort out some life insurance so that if I were to die the debt would be paid off and my wife would not have to find the money to meet the monthly mortgage repayments.
My wife was going to give up work a few weeks before the baby was due and had no intention of considering returning to work for about three years by which time we planned that our child would go to a day nursery. However, we were concerned that if I died she would not have enough money coming in to support her and our son in those early years as a result of which she may have to seriously consider going back to work sooner than expected to bring in additional income and have to leave our son with a child minder.
Another reason related to the schooling of our child. I went to a grammar school but my wife was educated privately. She was keen that our child should also be put through private education. Doing this would involve a huge financial commitment – more than the monthly mortgage repayments. There was no way that my wife would be able to fund school fees on her income alone once she returned to work if I had sadly passed away. So, we thought that it would be a good idea to include this commitment when calculating how much life insurance I would need.
So, how did I go about arranging life cover? Well, the bank I worked for had an insurance broking department so the natural thing to do was pick up the phone and talk to them which I did. The person I spoke to was very helpful, informing me about the various types of life cover and what they could be used for, asked for a few personal details such my name, date of birth, occupation, whether I smoked or not, how much cover I was looking for and for how long and how much I could comfortably afford to spend each month on life insurance premiums. She quickly provided me with some quotes for a couple of different types of life insurance policies.
To cut a long story short, I arranged a Decreasing Term Assurance policy to cover the capital and interest repayment mortgage which meant that should I die during the term of the policy there would be enough life cover in place to pay off the mortgage. I also took out a Level Term Assurance policy that would pay out a lump sum in the event of my death during the term of the policy which I arranged for a period of twenty one years being rather old fashioned working on the basis our child may be financially dependent upon us for that sort of period. When I took out those life insurance policies they only cost me a few pounds a month each. I was in good health so they were quickly underwritten by the insurance company and I did not even have to go for a medical.
The term life insurance policies that I took out provided my wife and I with peace of mind that should I die whilst the cover was in place she would have enough money from those policies and the death in service benefit from the bank to pay off the mortgage, provide her with a good standard of living and put our child through private education and university.
So, if you are looking for life cover you have a number of options. For instance, you could do what I did and pick up the phone to an insurance broker or you could seek independent financial advice from a qualified financial adviser or you could even just go on the Internet and obtain one or two life insurance quotes either direct from insurance companies or use the services of a price comparison website. In some instances, once you have decided upon the type, amount and term of life cover you require, it is possible to complete a proposal form and be covered in the space of a few minutes from the comfort of your home.
Therefore, if you are a dad or are about to become one, don't put off until tomorrow something that you can do today – get that life insurance sorted out as quickly as you possibly can!
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