Life insurance isn’t a subject that anybody wants to think about as no on plans to pass away, even though we know it’s very important. With all the information on the internet and speaking with people we know can sometimes make it confusing. Which isn’t helped by the many common misconceptions about life insurance. The trouble with misconceptions, is that it can stop people from making important decisions about the cover they might need which could impact them or their families.
At Life Insurance Cover we take off the foil hat and tackle 10 life insurance myths to give you a clearer understanding of what is correct and which is wrong when it comes to getting the right cover for you.
1: I’m not the main earner in our household, so I don’t need life insurance
Almost every household in the UK has a higher earner in their household, although it important for them to protect themselves and the family. It’s a common misconception that if you are a lower earner or stay at home parent, your death will not will that severe an impact. If you take care of the children or the household while your partner is at work, a cash sum could cover childcare costs or pay for extra support around the house. This could give your partner the option to continue working should the worst happen to you.
2: I’m young, fit and healthy, I don’t need life cover
The invincibility of youth, thinking that circumstances will not change. Throughout the UK young adults have been made aware of how easily things can change in 2020. If you have financial dependents, a young family or adults who rely on you financially. By purchasing life insurance when you are fit and healthy makes it much cheaper than when you are in your 40’s or beyond. You are never too young to protect yourself and your family with life insurance.
3: Insurers don’t pay out on claims
Throughout 2019 the amount of claims paid by life insurance companies exceeded 98%. Providing it’s a valid claim, a claim payment will be paid to your family or beneficiaries. The main reason for the 2% on non-payment of claims was for not disclosing medical conditions.
Read our guide on the small print and exclusions.
4: Life insurance is too expensive
As a whole of market insurance broker Life Insurance Cover compares all of the life insurance companies to find the best/cheapest policy possible. With life insurance starting from £5 a month, which is equivalent to about 20p a day. You will be surprised at how cost effective life insurance can be.
Policies costs do increase with age and medical conditions, so it is always better to get insurance when you are younger, fitter and healthier.
5: Life insurance payments are always taxed
Life insurance payments are exempt from income or capital gains tax.
Depending on the value of your estate when you die, the pay-out may be subject to Inheritance Tax (IHT). The current threshold for Inheritance Tax is £325,000 per person.
However, you can avoid this outcome by putting your life insurance policy into a trust, which can also speed up the time it takes for your beneficiaries to receive their payment rather than waiting for probate to conclude.
Guide on life insurance and tax.
6: I have Death In Service, I don’t need life insurance
Some employers may provide life cover as an occupational benefit, this is commonly known as death in service. However, even if this applies to you. It is still be a good idea to consider whether it meets your personal protection needs. It is quite likely to be restricted to protecting only you and it is unlikely that you will be able to choose the amount of protection and it may not cover your partner.
Another consideration would also be, what would happen to your Death in Service cover should you lose your job.
Read our guide on death in service.
7: I will have to take annual health check-ups
Once you have your policy in place you will not be asked to provide annual health check-ups.
This is because the life insurance company that you have chosen, has already agreed to the risk that you may pose to them when you purchased the policy. However, if you have an undeclared medical condition an insurer may ask for a medical check-up.
8: I need life insurance for a mortgage
There is no legal requirement to take out life insurance when you get a mortgage, however given the size of the financial risk it is worth protecting it. A mortgage may be one of the biggest financial obligations you ever take on, and so having cover in place can give you peace of mind. Whilst also creating stability for your family and dependants.
Check out our guide for more information about life insurance and mortgages.
9: I will need a medical examination to get life insurance
It depends on the individual, their lifestyle and family medical history. Another factor is the amount of cover applied for. But our experienced team will always advise, a medical examination is not always required. Most insurers will write to your GP to confirm the medical declaration that you have made. If you have an ongoing medical condition, the circumstances might be slightly different.
Read our guide on pre-existing medical conditions.
10: The insurer will run a credit-check on me
Put simply, insurance providers do not require a credit check to issue you with a life insurance policy.
Remember, the cover you choose will depend on your circumstances and needs. Find out more about the insurance products we offer.
At Life Insurance Cover we ensure that any questions or misconceptions you have are answered. Our specialist team compare life insurance companies for you, to find the best cover for you. There is no such thing as a silly or weird question, our team who have years of experience will answer any queries that you may have. In conclusion, that is 10 Life Insurance Myths debunked. If you have any questions about Life Insurance or a myth you may want the answer for, simply drop us a message on the website or social media.