This is a guest post about life insurance from Reassured.

Are you a stay-at-home mum or dad? Do you have life insurance in place? It’s easy to think that if you don’t earn a salary, then you don’t need cover protection.

In fact, according to insurance provider Legal & General, nearly 50% of parents in the UK don’t have any form of life cover [1]. But do they need it and is it worth the monthly cost?

Many assume that life insurance is just necessary in order to protect the loss of the breadwinner? After all, they pay the mortgage, utility bills, food shop and living costs every month, right?

WRONG.

Any family would be massively impacted, not just practically but also financially, if a stay-at-home parent was no longer around.

If the worst were to happen to you who would step in and support the family and run the home?

Think about all the unpaid roles you fulfil every day:

• Childminder
• Teacher
• Nurse
• Chef
• Cleaner
• Laundrette
• Taxi
• Gardener
• Dog walker
• Personal shopper
• Accountant
• Relationship counsellor.

Could the family afford full-time childcare in you were no longer around? Who would take the children to school? Would you need to hire a cleaner?

The average cost of full-time childcare in 2017 is £223.36 a week or £277.84 per week in London – (source: www.moneyadviceservice.org.uk).

If childcare was not an option, would your partner need to cut down on their work hours in order to help at home? If so, would this affect their salary, on which everyone relies?

According to research from The Money Charity, the average cost of raising a child, to the age of 21, is £30.23 a day or a mind-boggling £231,713 over 21 years. What if you have 2 or more children? – (source: http://themoneycharity.org.uk).

This post is not meant to scaremonger, but simply encourage you to think about your personal circumstances and the need to protect your loved ones.

Life insurance obviously can never replace a parent, but it could help out financially at a time when your family is suffering emotionally.

For example, a pay out could allow the family to remain in their home and not have to downsize because they couldn’t afford the mortgage. Avoiding the upheaval of moving house/area and possibly moving schools etc.

The benefits of life insurance:

• Pay off the mortgage in full (£121,567 average mortgage debt^[2])
• Cover future family living costs (food & drink, fuel, utility bills, university fees)
• Provide an inheritance (spouse, children and/or grandchildren)
• Cover funeral costs (£4,078 average cost of a funeral in the UK^[3])
• Clear any outstanding debts (car finance, personal loans, credit cards).

Are misconceptions affecting whether people take out cover?

Research suggests one influential factor as to why people don’t take out life cover is simply misconceptions regarding what it does and what it costs.

Their findings indicate that there’s a sizeable gap between customer perception and the reality when it comes to insurers paying out claims.

But is this perception accurate and what does the data tell us?

Myth: Insurers pay out on less than 80% of claims » Fact: Insurers pay out 98% of claims

80% of people surveyed in a recent report from Pacific Life Re^[4] thought that pay out rates were less than 80%, however according to data from Association of British Insurers (ABI) the true figure is 98%^[5].

When customers were asked why they think insurers decline claims, 58% answered ‘due to the policyholder not providing accurate information when they bought the policy’.

17% replied, ‘insurance companies always try to avoid paying out’ and a further 9% cited ‘loopholes’ or ‘insurance companies being too profit driven in general’.

For the 2% of claims which were declined, the main reason given was non-disclosure, (or misrepresentation). This means the details given during application were not 100% accurate.

It’s clear that many in the UK are unsure of the cost of life insurance or whether claims are ever paid out. These common misconceptions could help explain why ‘8.5 million people are without’ any form of life cover.

Research published by insurer SunLife suggests ‘that 47% of people have no idea how much life insurance costs’. Whereas ‘people overestimate the cost of insurance by 394%’^[6].

In conclusion……….

We have covered in this post why we believe in the majority of cases stay-at-home parents should take out life insurance. We have also addressed some of the myths surrounding life insurance, specifically around pay out rates.

However, it’s clear many parents in the UK still don’t have life insurance protection in place, potentially leaving their loved ones exposed and vulnerable.

Hopefully, this article has helped dispel some of the misconceptions and helped form a more accurate picture. If you have dependents who rely on you and/or a mortgage but don’t have life cover, why not seize the day and take out a policy.

Remember, the younger you are when taking out cover, generally, the cheaper it will be. You may even be able to lock in really low premiums, (under 20p a day).

Then get on with the more enjoyable thing in life, like spending time with your family, secure in the knowledge, their financial future is protected, whatever the future may hold.

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Sources:

[1] Legal & General – www.legalandgeneral.com/life-cover/confused-about-life-cover/articles-and-guides/protection-life-insurance-poll.html

[2] The Money Charity – http://themoneycharity.org.uk/money-statistics/51592

[3] Money Advice Service – www.moneyadviceservice.org.uk/en/articles/how-much-does-a-funeral-cost

[4] Pacific Life Re – The Moment of Truth: A Consumer’s Perspective – www.pacificlifere.com/content/dam/paclife_corp/pre/public/publications/pacific_momentoftruth_8pp_LOW.pdf

[5] Association of British Insurers (ABI) – www.abi.org.uk/globalassets/files/publications/public/key-facts/abi-key-facts-2017.pdf

[6] SunLife – www.sunlife.co.uk/press-office/public-overestimate-price-of-life-insurance-by-almost-400-