Legal & General highlights the key life stages at which people need to review their insurance needs:
- Buying a house - Critical illness cover and income protection
- Getting married - Life insurance
- Starting a family - Family income benefit
- Starting a business - Business protection
- Starting a new job - Review income protection
- Expand family - Review existing family income benefit
- Moving to a bigger house - Review existing life insurance and critical illness
- Divorce - Family income benefit to cover maintenance payments. Review any joint policies
Bonnie Burns of Legal & General says: "Cover needs to be reviewed as people move to bigger houses and expand their families. If people find that their budget restricts the amount of cover they can take, then at the very least mortgage debt and bills should be covered. Some protection is better than none."
Typical family scenarios:
The young family
Tom and Carla are in their early thirties and have two young children. They have a £100,000 repayment mortgage on a £150,000 house. Tom works full-time, whereas Carla works three days a week. Both are non-smokers and in good health. Tom and Carla need to consider fully protecting their mortgage. They should look at decreasing term insurance with critical illness cover and a mortgage payment insurance plan. This will ensure that their mortgage is protected if either of them suffers a critical illness such as heart attack or certain types of cancer. They will also be covered if they are unable to work due to accident, sickness or unemployment.
In addition family protection must be looked into as they have two young dependants. A family protection income plan pays a monthly income to the beneficiary. This plan is intended to provide families with an income on death, which will cover expenses such as household bills and childcare costs.
The single parent
Sue is 40, employed full-time and has one daughter aged 16. She has a £80,000 interest-only mortgage, £2,000 debt in credit cards and no savings. Sue is a non-smoker. Sue must consider fully protecting her mortgage. She should look at life insurance with critical illness cover. While her daughter is still financially dependant on her, extra family protection must be considered. An income on her death to help her daughter with living costs is advisable in the form of a family protection income plan.
The middle-aged couple
Geoff and Tanya are in their late fifties and both their children have grown-up and moved out. They both work full-time and have a small residential repayment mortgage of £30,000 as well as a buy-to-let interest-only mortgage of £150,000 after they bought a flat for their retirement nest egg. The key area here is Geoff and Tanya's mortgage on their main residence, as this is their home. A decreasing term assurance with critical illness cover must be considered.