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BLOG: Life insurance is easier and more affordable than you think

Paloma Kubiak
Written By:
Paloma Kubiak

We never like to think of the worst, but don’t let misconceptions stand in the way of taking out a life insurance policy.

Keeping on top of your finances can often feel like a full-time job in its own right; worrying not just about your own incomings and outgoings, but also whether the protection and policies you have are the most suitable for your needs.

Price comparison sites do a good job at helping people who know what they need to buy – but that’s a very small fraction of the population. The rest are left in the dark about what protection they need. It’s this perceived complexity that means it sits forever on our to-do lists – a rainy day job that never gets tackled or something to consider later in life.

Right at the heart of this category is life insurance. None of us like to think of worst-case scenarios or picture how we would cope financially after the loss of a loved one, but the uncomfortable nature of these discussions isn’t a reason to bury your head in the sand.

It’s also important not to dismiss it out of hand due to existing misconceptions either – life insurance isn’t just for older people, it isn’t just for the wealthy and it needn’t be expensive either; certainly not compared to the peace of mind it can give you.

The way life insurance is currently sold in this country relies on a series of trigger points. The main milestones include buying a house (because your financial commitments significantly increase), becoming a parent (because you’ll have someone else dependant on you financially) and sometimes getting married (for similar reasons). While it makes sense that you won’t necessarily think about taking out cover until you strictly need it, part of the problem is just when people think it becomes necessary.

Take getting on the housing ladder for example. To obtain a home loan, your bank or building society will insist you take out buildings insurance in case anything untoward happens to your property. In other words, they are protecting their asset.

But they don’t insist on you taking out insurance to protect your ability to make repayments; the responsibility for that rests squarely on your shoulders. While it is a sensible staging post for homeowners to seriously consider life insurance, anecdotal evidence suggests that as many as half of UK mortgagors don’t have such a policy.

Another potential reason for the UK’s life insurance ‘protection gap’ is that, given distribution of this type of cover is often offered through intermediaries, some brokers may feel that certain segments aren’t lucrative enough to target, creating something of a bottleneck for these under-served sections of society.

Take-up of our platform in the three years since we launched would certainly suggest there are entire demographics who feel empowered by a simple tool that helps them establish exactly what cover they need: significant numbers of single parents, individuals in their 30s and households with annual incomes below £55,000 are realising that life insurance is required in their circumstances. And starting from £5 a month, it’s affordable too.

This same is happening for income protection – many self-employed people, who don’t have the support or insurance offered by some employers should they be unable to work for health reasons, are realising they have a need for it.

The complexities of calculating how much life insurance you need and the number of providers out there can be intimidating for those taking their first steps into arranging cover, which is why platforms that can cut through the noise and only show you options that suit your needs can have an important part to play in democratising the process.

While there is no one-size-fits-all policy and each applicant is likely to have their own individual needs, incorporating AI and machine learning into the system also means that more informed decisions can be made based on what previous users have found suitable.

None of us like to dwell on potential problems we might face in life, but preparing for the worst and making sure you are properly protected gives you peace of mind in the here and now and limits the financial implications of any such event. Don’t automatically assume life insurance is for other people and look into it today – it could be easier and more affordable than you think.

David Vanek is CEO & co-founder of robo-adviser service Anorak