Obtaining life insurance whilst surviving the COVID-19 financial crisis

The outbreak of COVID-19 has left the world in financial disarray, with many companies forcing closure due to going bankruptcy, and households struggling to maintain bills and daily lifestyle.

As a result, many families have been left with little to no disposable income on a monthly basis.

But the recent pandemic, has brought to light the delicacy of human mortality. Many, who haven’t before, have begun to question ways to protect their loved ones if the worst were to happen to them.

The most common way of protecting the financial future of your loved ones is by arranging life insurance, but when times are hard, how can we afford this extra expense?

A life insurance policy will provide your loved ones with a lump sum pay out if the worst were to happen to you and the funds could be used to support your loved ones in their time of need.

Whilst we feel the financial strain the virus has succumbed upon us, life insurance is more affordable than you may think, and there are several steps you can take to make it even more affordable.

The UK’s largest life insurance broker, Reassured, talk us through these crucial tips…

Compare quotes

As with most types of insurance in the UK, there are a number of different providers, each varying significantly in price.

By comparing quotes, you can view the various options available to you and ensure you are securing the best deal.

There are a number of different ways to do this;

  • Independently
  • Price comparison website
  • Life insurance broker

With the vast number of providers in the market, it will come as no surprise that carrying out your own independent research can become time consuming.

Whilst you can ensure you include all potential providers as opposed to a shortened panel, it will require a large investment of time and analysis to ensure you get the right cover to suit your needs.

Price comparison websites have increased drastically over the past 10 years with new ones appearing almost daily. These are extremely convenient into today’s busy world as the time it can take to generate a number of quotes can be as little as seconds.

However, deciphering the right cover may not be as easy as identifying the cheapest option. Due to the long-term nature of life insurance, a large amount of information is required at application.

Ensuring all of the information you input is accurate and that you fully understand the terms of the cover you are selecting, will require a strong understanding of the product.

This can be confusing and in the long run could leave your cover being invalid or not as cost effective as it may appear.

Using a life insurance broker will allow you to work with an expert to compare quotes and ensure you have all of the information you need to make a fully informed decision.

Furthermore, despite popular belief, many brokers will charge you less than if you were to go directly to the insurer, as costs for their services will be recovered from the insurers in the form of commission.

Arrange only the level of cover you need

The level of cover you can arrange will vary significantly dependant on the type of policy you choose. In many instances this can be up to £1,000,000.

As a result, when arranging life insurance, it can be tempting to opt for the highest level of cover available to you.

However, with higher levels of protection come higher monthly premiums. Therefore, when feeling the financial strain of the COVID-19 pandemic, it is even more imperative than ever to ensure you only arrange the level of cover you actually require.

When determining the level of protection you require, you should consider all of the financial commitments which would need to be covered as a result of your passing.

This is likely to include, mortgage/rent costs, funeral expenses, income loss and daily lifestyle expenditure. The total of these aspects will then provide you with the overall amount of cover you require.

By arranging only the amount of cover you need, you will ensure you don’t pay more on a monthly basis than absolutely required.

Arrange the right type of cover

As with providers, there are a number of different life insurance types available in the market, some more expensive than other. Each type of life insurance policy is best suited to protecting a different aspect of your life. Therefore, by determining exactly what you are looking to protect, you can ensure you are not paying for a more expensive policy type than you actually require.

Level term life insurance provides cover for a specified period of time and the pay out sum remains fixed throughout your policy.

As a result, it is best suited to financial commitments which will not change over time, such as an interest-only mortgage or daily living costs.

Decreasing term life insurance on the other hand, lasts for a specified period of time but the sum assured decreases over the period of cover, making it ideal for protecting a repayment mortgage or other large debt which declines in balance overtime.

Whole of life insurance is similar to level term life insurance, the sum assured remains the same but cover lasts for the rest of your life.

It is easily possible to pay more into the policy than the overall cover amount, therefore, it is best suited to those in later life who are in good health.

It is ideal for those looking to secure a guaranteed pay out to provide an inheritance or cover inheritance tax fees upon their passing.

Over 50s plans offer guaranteed acceptance for all UK citizens aged 50-85 and no medical information is required, but the overall sum offered tends to be capped at £25,000. Offering a much smaller amount of cover than the other policy types, over 50s plans are ideal for covering funeral costs.

Dependant on your individual circumstances, decreasing term life insurance tends to be the cheapest form of cover, with whole of life and over 50s plans being the most expensive.

Therefore, determining the right type of policy to suit your needs, can prevent you from paying more than you need on a type of protection that isn’t right for you.

Time it right

The COVID-19 pandemic has caused the life insurance providers to re-evaluate their application process.

Again, this will vary between providers, but many have now incorporated questions around the virus, including any recent cases or symptoms.

Therefore, to ensure the most likely chance of being accepted, it is important to ensure that you arrange cover at the right time – When you have made a full recovery or have not experienced any symptoms.

When calculating your premium costs, life insurance providers will take into account the likelihood of a claim being made by collecting information about your age, health and smoking status.

Therefore, the sooner you arrange cover, the more likely your premium costs will be favourable, providing no COVID-19 symptoms are currently present.

Summary

By following the above advice, even in this financially unstable climate, it is still possible to arrange life insurance protection even on a tight budget.

Cover can be arranged from as little as 20p a day and can provide lifelong protection to ensure your loved ones don’t suffer financially if the worst were to happen to you.