Today, I have a guest post from fellow single mum Gemma Holloway of life insurance broker Reassured about a subject that should be important to all of us, Life Insurance. Take it away, Gemma…
I had never apprehended becoming a single mum at the age of 29, but it was inevitable.
Unfortunately, that meant that I was now the sole provider for my 4-year-old daughter.
I had a will in place, so I knew in terms of care she would be provided for, but what about financially?
I returned to full-time employment just to make ends meet, and luck turns to have it, my new job was with the UKs largest life insurance broker.
It soon became apparent that this was the solution to supporting my daughter if the worst were to happen to me.
Life insurance was the answer
A life insurance payout could ensure that if the worst were to happen to me, my mortgage could be paid off, allowing my daughter to stay in her home, my funeral would be paid for, without the need to cause financial strain on anyone else and my debt would be paid, still leaving sufficient funds to help support my daughters existing lifestyle.
The only problem was, on a limited budget how was I going to afford another (unnecessary) outgoing?
The first thing I had to do was to change my frame of mind, this wasn’t an unnecessary outgoing – This was protecting my daughter, something which wasn’t an option.
The second thing was to realise, it was more affordable than I first thought.
Getting the right type of cover
By selecting the right type of cover, the correct amount and comparing quotes, I was able to ensure that the cost of my monthly premiums was within my budget.
There are various forms of life insurance cover available.
The type of insurance best suited to your needs will depend on what it is you are looking to cover.
Term based cover will protect a specified amount of time and comes in three types; level, decreasing and family income benefit.
Level term cover provides a fixed lump sum payout which remains the same regardless of when you pass away during the term of the policy.
This makes it ideal for covering the cost of day to day living, an interest-only mortgage, funeral costs or an inheritance.
A decreasing term, on the other hand, provides a lump sum payout which decreases in value over the course of your policy term.
As a result, it is ideal for covering a repayment mortgage.
Finally, family income benefit provides on-going monthly, tax-free payouts to your loved ones for the remaining period of your term following your passing.
It’s great for replacing your lost income or helping with day to day living costs and doesn’t require on-going budget management.
Less likely to be suitable for a young single mum are whole of life insurance or an over 50s plan.
Whilst both do guarantee a payout, it is possible to pay more into a whole of life policy than the overall sum assured, which is made more likely if taken out earlier in life.
And an over 50s plan, on the other hand, offers guaranteed acceptance to all UK citizens between the ages of 50-85, which is a less likely age bracket for those with younger, financially dependent children.
Don’t take more cover than you need
With regards to the amount of cover, it can be tempting to arrange the maximum amount available for your individual circumstances.
However, the higher the sum assured, the more it is going to cost monthly.
Therefore, it is important to consider what it is you are looking to cover and arrange the amount of cover accordingly to avoid paying for more protection than you require.
Always compare quotes
Finally, the cost of life insurance can vary significantly between life insurance providers.
As a result, it is essential to compare quotes to ensure you save money on your premiums.
Life insurance cover is available for as little 20p a day and will vary dependant on the type of cover you require, the amount you cover and your personal circumstances.
Personally, mine costs me 43p a day and I used an insurance broker to arrange such cover.
Having some cover in place is always better than having none at all and using a life insurance broker will ensure they find a solution to suit your needs and budget.
They can help you through the confusing application and present you with all the information you need to help you make an informed decision.
It’s a good idea to take out life insurance as soon as possible as the cost of premiums will go up with age.
I’m more than glad I done it so that I know my daughter is protected if the worst were to happen to me.