Financial Myths: Solved

There are lots of rumours and assumptions made about buying insurance. In this blog post we aim to solve those mysteries and help you find the best option for you and your family.

Myth #1: I’m too young for life insurance

It may be a little morbid to think about, but if you have a family that depend upon your income, you might want to consider a life insurance policy that will look after them if you were to pass away.

The money will help to pay off your mortgage, day-to-day finances or your funeral expenses. Anything your family could need to survive without you.

According to Barclays, if you take out a policy when you are younger and healthier, then the premiums are likely to be more affordable. By purchasing the policy at a younger age you could be saving money in the long term. If you wait until you are older and have developed a medical condition, you could find the policy is more expensive than if you had taken out a prior policy.

Life insurance payments will depend on the amount you would like paid out upon your death, as well as a number of factors such as age, hobbies, smoker status, medical history and occupation.

Myth #2: Insurance policies never pay out

Many people believe that insurance policies never pay out, or that insurance companies try to avoid paying when possible. This makes customers wary about taking out policies.However, this is not the case. According to the ABI (Association of British Insurers) protection insurers paid out a record-breaking £5 billion in 2017.  

In 2017Aviva paid out a total of £900 million to more than 25,000 customers. The company paid 98.9% of life insurance claims and 93.2% of critical illness claims. 

Legal & General paid £636 million to customers in 2017 – 98.3% of life claims were approved, as were 95.39% of terminal illness claims.

Myth #3: I don’t need income protection; I could claim Employment and Support Allowance instead

Income protection insurance will cover you if you can’t work due to ill health or injury. It will provide regular income until you can return to work or retire.You may think that you could skip this insurance and claim Employment and Support Allowance instead. However, Employment and Support Allowance for a single person over the age of 25 is only £480 a month.

According to the Money Advice Service the average monthly mortgage payments in the 2016-2017 tax year was £671.23 in the UK. And then you need to consider utilities and food. You could find you’re in a deficit each month.

You can find income protection policies that will pay out for up to 2 years, rather than until retirement. This will make the insurance policy cheaper and more suitable for younger customers. You can also have an age-related policy that starts with lower premiums and increases as you get older.

When you consider that each year 1 million people in the UK find themselves unable to work, it makes income protection worth exploring.