Life Insurance – the sooner the better - By: Michael Challiner

A pension scheme is important to the individual, and most people are aware that if they have no other cover it is essential to initiate a scheme in preparation for later life. Really it has a close relative in life insurance, although the pension is tied in to receiving a repeating payout if you survive to a specific date. Its relative – life insurance – still operates to a specific date, but payment can be triggered by an early demise of the policy holder.

The factor common to both pensions and life insurance is that getting an early start can reduce costs considerably. It is however a long time from starting work to retirement and circumstances can change considerably in this interval. When you are young and healthy it is very difficult to think about long term illness, but it can hit any of us at any time and the effects can be devastating. It is difficult to prioritise these items but certainly critical illness cover should not be last on the list.

Treatments for cancer are improving all the time, and many forms which once were fatal can now respond to newly discovered cures; the fact remains that the even tenor of life can be seriously disrupted by this or other major illness. During treatment it may be difficult to retain your current employment, especially when there are long periods when time away from your job cannot be avoided. If rest and recovery is necessary it is likely that your salary will be paid for three months, and then you will only have incapacity benefit to fall back on.

Don’t delude yourself with the rumours that many people can live like kings on disability and incapacity payments – maybe the odd one can, and maybe there are reasons of which others are unaware. Suffice it to say that if you are reduced to this level of income, you will almost certainly find that kings must live frugal lives indeed.

So what is to be done to avoid this situation? The answer lies in critical illness insurance, but again it must be stressed that this should be taken out at the earliest possible opportunity. If an opportunity does not appear to be available, do your best to make one – start soon enough and there will be no necessity to live a life of denial to meet the payments, as the costs will be much less. Leave it a few years and it may well be that you just cannot find the necessary funding.

Why not begin your search on the internet, or collect recommendations from acquaintances, and then request further details from your chosen source. Examine the information very carefully; it is all too easy to think that you are covered for every eventuality, then when illness strikes, to find out that what you have got comes in the list of exceptions. Above all, make sure that you are covered for the core or most likely conditions i.e. cancer, heart attack (and often associated by-pass surgery), stroke, kidney failure (not forgetting organ transplant) and MS.

Not a cheerful list, but these should be covered as a bare minimum. Examine in fine detail the policies on offer – many will provide cover for a range of other potential illnesses, but keep an eye on the costs. Medical insurance is not noted for its ‘buy one, get one free’ approach! Once you have settled on which company will supply the cover and exactly what cover you require, you can then complete the application form – but beware – pitfalls ahead.

You are of course applying whilst still young so you are probably fit and healthy, or if you have had any potentially major problems they are easy to remember. It is vital that you do not (accidentally or deliberately) miss any known condition or significant previous illness. If in doubt, put it down; you do not want to find that, some years in the future when you submit a claim, it is refused because of an earlier and undisclosed illness.

Now you can start to relax, but (sorry to nag) have you taken out life insurance? If not, then this is your next priority. Again you could make a start by browsing the web or picking up recommendations. You will quickly find that there are a number of options available to you, usually with names which make a poor show of revealing their exact purpose to the uninitiated. Such items as ‘term insurance’, ‘increasing term’, ‘decreasing term’ and ‘whole of life’ are likely to be offered to you.

What you shouldn’t do is accept these titles on trust as though you know what they mean; if you don’t understand them, ask questions. Any salesman worth his salt will be only too happy to explain the operation of these plans in layman’s terms. If your contact appears to be reluctant to explain or worse still tries to ‘blind you with science’, then you have to accept that you need to look elsewhere for your policy. It is important that you do look elsewhere and don’t just give up – at some time in the future you will be very glad that you persevered.

There are 3 major items – critical illness insurance, life insurance and pension – which need to be dealt with at an early age, before the costs escalate.

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