There are two things certain in life; death and taxes. How well prepared are you for the former?
Me: “Mum, have you considered getting life insurance?”
Mum: “Ehhhh?! Are you trying to kill me?! God forbid, it’s not me that will die before my time!”
… and that is how critical discussions get swept under the rug in my household.
Black people are FOUR times more likely to die from COVID-19, than their white counterparts; according to the ONS. It is never easy discussing inevitable death with your parents. We want them to be with us forever, but it breaks my heart seeing a flood of GoFundMe pages dedicated to memorials on social media lately. Putting the spotlight back on life insurance can help (in its little way) to combat the socioeconomic cards stacked against us.
Whilst I have no data to support it (there needs to be a study on this), my hypothesis is that a significant % of Black British households do not have a robust life insurance policy. I created a short survey aimed at better understanding the views of the black community on life insurance policies and here are my findings.
Key findings from my survey
· 72% of participants had no life insurance policy, 28% did.
· Those that don’t have a policy: 60% were women, 40% men.
· Those that have a policy: 75% were men, 25% were women.
· Those that have a policy: 70% purchased life insurance through work, 30% bought it via personal means.
o Only old people buy life insurance policy: A lot of young people have life insurance policies, admittedly because it is provided as part of their work benefits.
o Life insurance is an unecessary expense and it’s expensive: Aviva’s life insurance policy starts from as little as £5 per month, L&G starts from £6 per month. How expensive it is depends on many factors, your age being the most important. However, I don’t think it will break the bank for most.
o I have no family/assets/dependents to protect as of yet, I am too young: It is worth thinking of who will foot the bill if the worst happens and could that person/people do it comfortably?
o It is difficult to get one: You can get life insurance policies from banks, brokers, credit card companies, financial advisers, retailers (i.e. Tesco), insurers (i.e. Aviva), comparison sites (comparethemarket, moneysupermarket), your mortgage provider. Pretty much anywhere.
o It is something that white people get: Personally, I understand why some might see it this way, however I believe with more conversations, life insurance will be normalised in the Black British community.
o Insurers don’t pay out: Life insurance is one of the best policies for a payout, with a payout rate of 98%!
o It is taxed anyway: You can avoid this outcome by putting your life insurance policy into a trust, which can also speed up the time it takes for your beneficiaries to receive their money.
What should I think about when discussing life insurance with my parents?
· Have your parents paid off their mortgage yet?
· Are there any outstanding debts or loans?
· What assets, including property and savings, do they have?
· Is one parent financially dependent on the other?
The ball is in your court, but here is my 2 pence.
Can I take out an insurance policy on my parents? In most cases, the answer is no. You have to prove insurable interest (which means that there is a direct financial loss to you if the worst were to happen). Examples include: your parents owe you a sizeable amount of money, you and your parents are jointly responsible for repayment of a mortgage/debt.
Read the small print: Policy exclusions are real. Exclusions are usually stated in the policy documents and should be highlighted to you before purchase. Policy exclusions mean you won’t be covered under certain circumstances.
Answer your policy questions honestly: In applying for life insurance, they will ask about your smoker status, your health, lifestyle, job etc. You need to be as honest as possible to ensure your claim is valid (if the worst happens, touch wood).
Extras to consider: Can I get critical illness and/or income protection policies combined with my life insurance for a small additional fee?
Reputation of the insurer: Simply googling the insurer would do the trick — finding out how well the insurer has paid out its life insurance claims in the past always works.
Life insurance is there to protect your loved ones, if the worst happens. Please consider it before it’s too late.