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Insurance

Life a low priority

Research by some of the UK’s leading financial organisations has found that millions of people are not insuring their lives, leaving their loved ones vulnerable.

Life insurance company Scottish Provident, part of the High Street bank Abbey, recently reported that as many as 50 per cent of the population do not have life insurance, which has worrying implications.

Paul Bradshaw, Chief Executive of the Insurance and Asset Management Division at Abbey, said: “People are obliged legally to have some types of insurance – for example car insurance, but the research shows that non-mandatory types of cover such as life and critical illness insurance are viewed as a low priority by many people. This is extremely worrying.

“For people with dependants, it is vital to plan for the worst whilst hoping for the best. Failing to provide a safety net can mean a serious illness or the loss of a loved one can leave not only emotional heartache, but the possibility of financial distress.”

Research conducted by Sainsbury’s Bank earlier this year, which was centred around the cost of raising children, echoed the Scottish Provident’s findings and estimated that as many as four million parents may not have life cover.

Life insurance is designed to protect the financial well-being of your dependants in the event of an unexpected loss.

There are many permutations of life insurance ranging from policies which simply pay out in the event of death within a certain time period (‘term’ cover) to those which include critical illness cover, allowing you to claim if you are left unable to work due to serious illness. Some policies are even more flexible and allow you to withdraw cash from the funds accrued over the term of the policy.

Companies such as Creditmarket Ltd advertise a wide variety of UK options at their website www.creditmarket.co.uk.

Whilst a small number of mortgage providers will require you to take out life cover as part of your contract with them, for many people this is a formality to which little attention is paid. There is no legal requirement to get your life insurance from your mortgage provider and it may not be the most cost effective solution. Life insurance is no different to taking out a policy for your car and as such, you should compare and contrast the offers from a number of providers to find the policy which best suits your financial situation.

At the beginning of 2005, research conducted by the broker Lifesearch, reported that life insurance premiums would rise for the first time in a decade as escalated regulation from the Financial Services Authority, increased costs for distributors and providers.

However, the insurance market is driven and highly competitive and consumers continue to benefit from increasing competition between financial services organisations, which is keeping premiums to a minimum. Internet sales of financial products also help to keep overheads low for providers, passing on savings to consumers.

About the author
Tim Day, founder and developer of http://www.creditmarket.co.uk – online information and advice for UK consumers seeking personal and business finance products.