I heard a very interesting story over the weekend that I wanted to share with you…
Now this first part won’t surprise you.
Apparently, a key reason many mums choose NOT to take life insurance is because they resent paying premiums for 25 years – with nothing to show at the end.
It’s true. 25 years is a very long time to commit to those monthly payments, especially when there’s a high likelihood your policy will never pay – thankfully.
But does that mean you should take the risk and not get cover?
Not according to one mum. Keep reading to discover why she’s taken out life cover. I think you’ll start looking at its potential value for you and your children in a whole new way…
How to guarantee you WILL get a pay out
Having children or getting a mortgage are two big events that persuade lots of mums to look for life cover.
For me, the tipping point was taking out a mortgage. I was 29 and my eldest daughter was also on the way. After committing to that HUGE financial step, I knew I had to be more “grown up”, and taking life insurance seemed like a smart step. For me it felt good to have the peace of mind that our mortgage and a bit extra were covered for the next 25 years – whatever happened.
Personally, I opted for term life insurance, which means my insurance runs for a fixed amount of time.
But did you know you could also take out whole of Life cover?
Whole of life cover has no fixed term or end date. This means that if you continue to pay your premiums, a cash payout is guaranteed – regardless of when you die (providing you’ve met the T&Cs of your policy of course).
And this is exactly what Emily has decided to do.
Discover Emily’s story
Emily is 32 and took out life cover after the birth of her son, Morgan. She really didn’t like the idea of paying for insurance she might not need, and so she looked into the benefits of whole of life cover as an alternative.
Emily said that she liked the idea of knowing her son would be guaranteed a cash payout when she dies, and was keen to sign up to an affordable policy that would enable her to do just this.
Now, life insurance SHOULD NOT be seen as a form of investment and I need to make this very clear. Life insurance is just that, insurance on your life to provide financial security in the event of your death.
But interestingly, Emily said that after exploring all the usual options that would enable her to provide cash inheritance for her son and future grandchildren, whole of life cover started to look like a very good deal!
Emily wanted to give Morgan a £50,000 lump sum.
Due to her age, and because she is a non-smoker with no health concerns, she was able to get some very good whole of life deals. The best rate was with Pru Protect (Prudential). Her monthly premiums came out at £20.06 a month – and this is guaranteed to NEVER rise throughout the life of the policy.
Why not open a bank account?
I was curious as to why Emily would choose this route, and I have to agree that her thinking makes a lot of sense. Here’s what she told me.
“The alternative was to save say £20 a month for Morgan in a bank account. But the numbers just didn’t work out. My partner is a bit of a numbers geek and he spent a lot of time trying to calculate how else we could save £50,000 for Morgan at a rate of £20 a month. He concluded that we probably couldn’t do it. Firstly, because interest rates are so low at the moment and secondly, because we’d have access to the money, there would always be the risk that we’d dip into it if things got financially tough in the future.”
I asked Emily if she was worried about what would happen if she couldn’t keep up the payments. Here’s what she said.
“We deliberately set a monthly fee that was easily affordable for us. In addition, if I find that I’m struggling to cover the payments when I’m old and grey, Morgan can pay – after all, the money is for him anyway.”
Smart future planning
I’ve always seen life insurance as a smart way to plan for the unexpected – but I never saw it as a way to prepare for the inevitable. It seems to me that Emily and her partner have done some smart thinking to ensure their son will inherit a sizeable cash sum. And as parents, don’t we all just want our children to have THE best life possible?
If you’d like to learn more about the different types of life cover available to you, next week you can take a quick look at Katie’s video. I think you’ll find it useful.
What do you think?
What do you think of Emily’s smart future planning? I’d love to know your thoughts so please leave your comments below.
Disclaimer: Life insurance is NOT a form of financial investment. This is Emily’s personal story and is not intended to provide you with any advice. You should always speak to your financial advisor before committing to anything to ensure that any financial decisions you do make are the most suitable for you and your family.