It is fair to say that 2020 has been a year like no other.
The devasting impact of the global Covid-19 pandemic has made life feel more vulnerable than ever. As well as being a significant threat to our very existence, for many, it has also been a massive burden economically. Every age across the board has felt some sort of impact, with adults wearing face masks daily, to a kids face mask being a staple in lunch boxes when they return back to school. The way of life has changed for a period of time, and no one is too sure when it will completely end.
As teachers, the impact of Covid has been significant, as the way we operate has had to evolve and adapt. On occasions, it seems like we have had to become health care workers and hygiene experts, as well as educators.
As a result of life feeling more fragile, there has been a significant increase worldwide in people taking out life insurance policies to protect their loved ones financially, whatever the future may hold.
We thought it would be a good idea to investigate whether teachers need life insurance and if so, how to best save on monthly premiums in 2021…
What is life insurance and why might you need it?
Life insurance is simply financially protection for your loved ones, should you no longer be around to provide.
You pay a premium each month for your cover protection and if you were to pass away during the policy term, a set cash lump sum will be paid to your beneficiaries to use as they wish.
Monthly premiums start from around 20p a day for 200,000 of cover, with the cost being strongly influenced by the level of risk you pose to the insurer – the younger and healthier you are, the cheaper your cover.
The payout amount can be set to cover your mortgage debt, meet future living costs, ensure your children can be put through higher education and/or university, provide an inheritance, cover funeral expenses or clear outstanding debt.
Do teachers need life insurance?
Generally speaking, it is usually a very good idea for teachers to secure life cover.
In the UK, teachers receive what’s called a death in service benefit. Death in service provides your loved ones with a cash payout if you were to pass away whilst you are employed. (Please note, you do not need to physically pass away whilst in your place of work for this benefit to be realised, you just need to be employed there at the time of your passing).
However, the value of this benefit is usually only 3x times your annual salary and therefore not sufficient to cover things like a mortgage, which would enable the family to remain in their home or meet rising living costs.
What’s more, if you were ever to leave the teaching profession, you would lose your death in service benefit, as it cannot move with you.
Therefore, it makes sense to take out your own personal life policy to supplement your work cover, as this will remain regardless of your employment status.
UK life insurance broker Reassured Ltd have written an excellent article on teachers’ life insurance needs.
Do you have children?
Another major consideration as to whether you require life insurance and also how much cover you need, is children.
The average cost of raising one child in the UK up to the age of 21 is estimated to be a staggering 230,000, according to recent research. But what if you have 2 or 3 children!
The above is not meant to scare you unnecessarily, but merely make clear how important financial protection is, especially at this time.
So, when calculating the level of cover you need it is important to consider the number and age of your children, (or put differently, how long until they are financially independent?)
You should also factor in whether your children are likely to attend further education or not, as this is likely to impact the age at which they will become financially self-sufficient.
Do you have a mortgage?
Let’s face it, the biggest asset any of us are likely to ever own is our home.
The average mortgage debt in the UK is estimated to be 121,678, whilst in areas such as London and the South West this figure will be significantly higher. Whilst 35% of UK households are estimated to have no savings to fall back on.
As a result, ideally your life insurance should cover your mortgage debt to ensure your loved ones don’t have to sell the family home at what would already be a very stressful time.
A very cost-effective policy option is decreasing term life insurance. Here, the payout amount decreases each month in line with your repayment mortgage balance. It is the cheapest form of cover as the risk to the insurer reduces with every passing month.
You can also choose level term life insurance. Here the payout amount remains fixed (or level) regardless of when you pass away during the policy term. This means you can cover your mortgage, as well as meet other significant costs.
If you have a repayment mortgage, your partner could pay off the house and the longer you live into your policy, the more funds would be left over.
Age and smoking status
As mentioned previously, the younger you are, the cheaper your life insurance premiums. However, unfortunately people only tend to even consider life insurance after the age of 30.
Often, a major life event makes us consider life insurance for the first time. For example, getting married, having a child, buying our first property, losing a loved one or dare I say experiencing a global viral pandemic!
However, if you are able to be proactive and arrange cover in your early 20s you can secure cover for just a few pence a day, locking in these super-low premiums for decades to come. This could provide financial security regardless of how your life develops in the future.
Your smoking status also has a major impact on the cost of your life insurance, as it is closely linked with a number of serious medical conditions. What’s more, as we age the impact of smoking on the cost of cover only increases.
For example, premiums cost around one third more for a 30-year-old smoker, but 100% more for a 50-year-old smoker, when compared to that of a non-smoker.
Why not make 2021 the year you quit smoking, and then use the money you have saved to take out life insurance?
These are unprecedented times in which we are living in, especially within the teaching world.
In truth, I am not sure schooling or life more generally will ever be the same. However, securing life cover can at least ensure our loved ones are provisioned for financially whatever happens in the future.
Leaving you and your family to concentrate of being happy, healthy and enjoying a good work/life balance, without the financial worry.
I hope you have found this article useful and informative.