On Monday, Swiss Re published its annual European Insurance Report, highlighting a worrying EUR 10 trillion gap in life assurance across Europe. The UK ranks third worst in terms of consumer protection in the event of death or serious illness (behind Germany and Sweden). Worryingly, only 11% of Europeans believe themselves to be ‘financially well positioned’ if they die or suffer long-term illness or disability, and perhaps even more concerning is that 26% expect to rely on Government benefits (just £90 a week in the UK – source: www.direct.gov.uk, Sep 2010).
So do you need life assurance, and what might it cost?
When advising our clients on their financial well-being, a large part of their peace of mind is derived from the knowledge that their finances and their family will be looked after should the worst happen. Specifically, the following questions should be addressed in the event of death, accident or serious illness:
- Will the mortgage (or other debts) be paid off?
- Will my family be able to support themselves?
- Who will continue to pay school fees?
- Would I be able to afford the necessary medical bills?
- Could we afford to make the most of the time we had left?
- What if I were unable to work for a prolonged period of time?
Life and health premiums have continued to fall in recent years (£100,000 of 25 year life protection for a 35 year old male now costs about £8 a month – source: Webline, an online quotation service, Sep 2010), but new capital legislation for insurance companies (known as ‘Solvency II’) is widely expected to push the cost of protection up as life assurers are required to keep more capital aside to cover their liabilities. Hence, now would be a perfect time to take out new policies (or to review existing ones).