If you have just got married the last thing on your mind will be life insurance! However, as you begin your life together, potentially have your own family and move into a new home, life insurance is something to consider. Ensuring that your family are provided for in the long-term is very important.
Life insurance policies when you've just got married are a way of guaranteeing your partner is financially secure if you died. If you plan to start a family then a policy can also provide for your children.
There are numerous reasons why you might look to take out life insurance as you begin your new life together. Accrued debts, mortgages, personal loans and credit cards can all create significant financial liability.
It is possible to structure life insurance around your particular situation to ensure that your family are not faced with financial distress in the event of your death.
Continue reading to see why Life Insurance is important for newlyweds.
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When you commit to your partner, the chances are that together you will take on additional financial liabilities with potentially different roles in the household. If you are the main income earner then in the event of your death, your partner could be left financial exposed and unable to cover accumulated debts you have taken out together.
While many might expect joint finance to mean a 50/50 split with regards to the financial liability, this is not correct. When you sign a joint finance agreement, in law, both parties are liable for the full amount.
Therefore, if one of the parties was unable to contribute any funds towards the debt, then it would fall upon the other party to cover all repayments. This is where life insurance can be used to ensure debts are paid off in the event of your death.
Perhaps the question you should be asking yourself is, can you afford not to have life insurance? As someone who just got married, you will no doubt both have plans for the future, perhaps a family home, holidays and a car.
When taking out finance, you would consider all income coming into the household. What happens if you died? What happens if your income was taken away? How would your family cope with the financial liabilities left behind?
This is akin to asking, how long is a piece of string? It will depend upon your financial situation, plans for the future and income. You may wish to take into account mortgage liabilities, personal loans, credit cards and other debts you have both accumulated.
You’d also need to take into account the cost of premiums and what level you could afford. If possible, you may wish to structure your life insurance to repay all outstanding debts and leave some additional capital which your beneficiary/family can put aside.
Many people use life insurance policies to provide cover for mortgage debt which can take many years to repay. While the vast majority of people tend to have capital repayment mortgages, there are still some interest-only mortgages available.
Depending upon the type of mortgage you can structure life insurance around this liability:-
Term life insurance cover is a commitment to pay premiums for a set period of time during which the policy will pay out on your death. If you were to die outside of the agreed term, there would be no payout.
Therefore, this is perfect for mortgage cover, particularly if you have an interest-only mortgage. Let’s say you had a £100,000 mortgage with a term of 25 years you could take out a life insurance policy lasting 25 years and paying out £100,000 on your death. The mortgage liability would be taken care of.
This type of policy is perfect for those who have a capital repayment mortgage whereby part of the mortgage capital is repaid each month. If we assume you had a £100,000 mortgage over 20 years, then the life insurance policy would start at a £100,000 payout and taper down to £0 after 20 years.
As the potential liability for the life insurance company falls so would your premiums. The idea is simple; the life insurance payout will track your outstanding mortgage capital so that your family are left with no mortgage liability in the event of your death.
It is unlikely that any life insurance payout would be liable to either income tax or capital gains tax if structured correctly. When taking out a life insurance policy, you will be given the option to “write-in trust” which effectively means this is treated as a separate entity from, for example, an individual’s estate upon death.
Payment will be made directly to the beneficiary, and under normal circumstances, it would not be considered part of the deceased’s estate.
Circumstances change from time to time, and life insurance companies fully appreciate this. As a consequence, if you wish to change the beneficiary of your life insurance policy, then you will need to inform the insurance company in writing. No authorisation is required from the original beneficiary if you arranged the policy.
Many employers offer a death in service benefit which would see your beneficiary receive a lump sum payment or regular payments in the event of your death. The policy will cover you during your time of employment, whether your death is work-related or not.
If your situation changes, then you should advise your employer that you wish to change your beneficiary. This is relatively straightforward as you would just need to confirm the change in writing.
There is no hard and fast rule when it comes to death in service benefits. However, what you tend to find is that employers will pay between three and five times your annual salary. Assuming that you have named a beneficiary, this payment will be made relatively quickly as all parties realise the potential financial distress, which often follows death.
It may be that you don’t require personal life insurance while there is death in service benefits in place. However, as soon as you leave your employment, your death in service benefit will end. If your new employer does not have death in service benefits available, or you are looking to retire, you may need to consider personal life insurance.
The various uses of life insurance cover are often underestimated. Therefore it makes perfect sense to take financial advice if you are getting married and looking to the future. As we touched on above, life insurance is integral to protecting your family from issues such as mortgage debt in the event of your sudden demise. Many people fail to realise, but life insurance should be considered as part of your annual financial review.
When looking at insurance brokers, you will come across two different types, independent and tied. An independent insurance broker has access to the whole market with no restrictions. As the term suggests, a tied insurance broker is only able to deal with specific parties.
There is a general misconception that independent insurance brokers will always have a competitive edge over tied insurance brokers. This is not always the case.
Yes. Marriage is a big part of your life and can lead to some significant changes such as an extended family and maybe a bigger home. As a consequence, your financial situation may change dramatically in the years ahead.
If you require additional life insurance cover, there are two main routes. Number one, you can approach your current insurance broker/insurance company and ask to amend your current policy. Number two, you are allowed to take out as many insurance policies as you wish on a personal basis.
The vast majority of those taking out life insurance ahead of marriage will have their partner/spouse to be as the initial beneficiary. However, what would happen in the event that both parties were involved in a fatal accident?
Initially, this could complicate the issue. Life insurance will be paid out to the beneficiary of the couples will. In the event there was no will, then the courts would rule on splitting the funds between qualifying parties.
If you have children, it is very important to be in control of your finances. Therefore, appointing a second beneficiary, an extended family member or close friend, can help carry out your wishes.
The second beneficiary could be part of a subsequent arrangement to manage funds on behalf of your children until they reach adulthood. Again, this is something you should discuss with your insurance broker to ensure you are making the right decisions for your situation.
As a newly married couple, life insurance will be the last thing on your mind - but it is very important. During your time together, you may look at mortgages, personal loans, investments and other financial transactions. You may, therefore, build up a significant amount of debt, funded by your joint incomes.
In the event that one of the income streams was to disappear, this could cause serious financial hardship for those left behind. It is therefore very important to take advice on life insurance at the earliest opportunity.
Here at Money Savings Advice, we have partnered with some of the UK’s leading Life Insurance brokers. They have already helped thousands of people get the best Life Insurance cover and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.
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