When it comes to life insurance, many people secure cover based on the amount needed to keep a roof over their family’s heads and pay the mortgage. That’s not bad thinking per se, but it’s also not great thinking.
Consider the amount of cover you’re looking for carefully. Making your decision based solely on your outstanding mortgage balance doesn’t take into account all of the other essentials that have become part of the fabric of modern life.
The cost of children and your family’s lifestyle
If you have a family with one or more children, have you considered factoring the cost of bringing those children up when deciding on your cover? An article written in 2016 by ‘This is Money’, based on research by the Centre for Economics and Business Research, reported that the average cost of bringing up a child to the age of 21 in the UK is around £230,000, or £910 a month. Of course, this figure is likely to be even more now and, if you have more than one child, that cost is going to be even more significant.
With this in mind, it’s important to ask yourself whether your partner would be able to bear the responsibility of sustaining these costs if the worst happens and you weren’t around to contribute.
In addition, most people turning to contracting for the added income it can bring and all of the lovely things associated with this – a comfortable home, nice cars and hopefully some well-deserved holidays – it’s also worth considering the lifestyle your family has grown accustomed to.
How to plan for a cover that really does cover what you need it to
All of this means that, when it comes to arranging your life insurance, you should take care to consider what it is exactly that you want to provide for your family, beyond the mortgage, and what this means for the extent of cover you secure.
The best way to do this is to work with your accountant to calculate what these ‘lifestyle’ costs equate to for you and your family each year. From that point, and through working with a trusted broker, you can establish how long it would be sensible to contribute to these outgoings for. When you have done this you’ll have a much better idea of the level of cover that would be ideal in case the worst happens.
The good news – you can make savings as a Contractor through a Relevant Life policy
The good news (there is some!) is that when you are working as a contractor and running your own company, you can put your life insurance through your business expenses with a Relevant Life policy, enabling you to make significant savings through tax benefits.
The saving you make in paying for your life insurance this way can then be used, if you choose, to get the right level of protection in place to cover more than just the roof over your family’s head. Because, of course, the peace of mind that comes when you know your family will be cared for is the reason we all buy life insurance in the first place.
To speak to a Relevant Life Expert and get your Relevant Life Insurance quote, visit here
The information in this article has not been written by Caunce O’Hara & Co Ltd or any of Caunce O’Hara’s employees. None of the opinions or views contained within this article are Caunce O’Hara’s nor do we accept responsibility for any financial advice given within the article.
Caunce O’Hara & Co Ltd do not provide Life Insurance policies nor advice regarding Life Insurance.
Broadbench’s Relevant Life Expert is authorised and regulated by the Financial Conduct Authority number 590288 in respect of mortgage and insurance mediation activities only. Registered address: 2 Stanley Road, Poole, Dorset. BH15 1QY The company is registered in the UK, number 07491324.