The last 6 months have seen a great deal of change in the UK; home schooling became the new normal, well known brands shut their doors to the public and we spent days on end never leaving the house.
But more alarming than these changes, we have experienced a huge death toll of over 40,000 in the UK alone due to COVID-19. This unprecedented time has brought human mortality to the forefront of our attention.
This focus on the uncertainty of human life has led even more parents to seek out life insurance to protect the future financial stability of their loved ones should the worst happen to them.
But has the pandemic caused the life insurance industry to change? Should parents be taking additional precautionary steps to ensure their children are fully protected?
Keep reading to find out…
Writing your life insurance policy in trust
Whilst not a new concept, writing your life insurance policy in trust can be a huge advantage to your family if the worst were to happen to you. COVID-19 has caused significant financial strain amongst many families in the UK, making it more important than ever to ensure your loved ones receive the full benefit of a pay out.
The value of your life insurance policy automatically comprises part of your estate. In the UK, this overall value is subject to inheritance tax on anything above £325,000.
Whilst this value may seem a particularly significant amount, a £200,000 life insurance policy combined with a house worth £225,000 would subject your loved ones to £40,000 inheritance tax. And that’s before even taking into account any additional savings or investments you have in place.
Writing your life insurance in trust detaches the value of your policy from your estate, ensuring that your family will receive 100% of the sum assured, as well as reducing the remaining amount subject to inheritance tax.
The process is easy and completely free, and many insurers and brokers (such as Reassured) even provide a service to help you with the process, offering peace of mind that it has been completed accurately.
The good news is that many existing life insurance policies would not be affected by the recent pandemic, and that the large majority of policyholders would be covered if they were to pass away due to COVID-19.
However, some policies include a ‘pandemic exclusion’. Written into the terms and conditions of a policy, this invalidates cover if cause of death is due to a national or global pandemic. For policies with such exclusion in place, a pay out would be declined if you were to pass away from COVID-19.
The only way to determine whether or not your life protection includes such exclusion, is to review the individual terms and conditions of your cover.
Until recent events, the ‘pandemic exclusion’ has not been widely used within the industry, however, it can be strongly predicted that it will become a much more common occurrence. Therefore, when arranging life insurance cover in post pandemic UK, it is essential to review the terms and conditions of your policy – Especially with the likelihood of a second spike on the cards.
Cost of premiums
The cost of life insurance is calculated based on the likelihood of a claim being made. Insurers take into account a number of factors including age, health and more recently current world affairs. Until now, frequently visiting specific countries across the world could result in you paying higher monthly premiums due the increased risk.
However, COVID-19, whilst showing different rates across the globe, has been very prevalent on UK soil. Therefore, it is likely that arranging life insurance during the heat of the pandemic could result in you securing higher than usual life insurance premium costs.
Personal factors will still be used, meaning that your monthly costs will still be more favourable if a claim is less likely, but pandemic risk will also be taken into account. As a result, it is more important than ever to compare quotes to ensure you receive the best deal.
As we enter a ‘new normal’ many elements within the UK will take some adapting and life insurance is no different. As always, anyone who has some form of dependant in their life is likely to benefit from having life insurance protection in place.
It is essential to be aware of the specific terms and conditions attached to your policy and comparing various cover options to ensure you have the right protection to suit your needs.