When people take out a life insurance policy, generally their aim is to look after their family financially should the worst happen to them.
Life insurance is a long-term commitment but when major life changes occur, you need to review your cover. At different stages of your life, your cover should be increased or decreased in light of changing circumstances. Yet an analysis of new business placed with a major life company over one month shows that only three per cent of premiums relate to increases in life cover.
The birth of a child brings immediate and future financial demands. People need to recognise the importance of increasing their life cover to cope with their additional commitments.
People should also consider their life insurance when they purchase a new home and increase their mortgage or any other debt. In the case of untimely death or permanent disability it is important that the policy holder’s family is able to pay off any major debts and eliminate financial stress at such a difficult time.
A mortgage is both a financial and emotional strain if it can’t be paid off following the death of a loved one. An insurance policy should at the very least provide enough money to pay off the mortgage – as well as other debts.
Similarly, if the breadwinner dies there can be a significant burden on the surviving partner and their children. How will the family pay for education, transport, holidays and the like of living on a limited Government pension? What if it is the mother of the children who passes away or is disabled – how will the father be able to afford full care?
People need to be aware of all the threats associated with not increasing their life insurance when their personal circumstances change.
Source: Aviva