Is insurance really worth it?
Only the other day I was telling Ian, one of my good clients I had finally ‘cracked' and bought life insurance. Intrigued, he asked me all sorts of questions: what kind of policy did I get? Was it a ‘whole of life' policy or a one-off payment?
Before I had a chance to answer he added – why wouldn't someone like you with a presumably large property portfolio and property investment company just sell some properties to raise a million pounds (i.e. use the equity in your property portfolio), rather than pay an insurance company? What is the advantage of an insurance policy in this respect? Hope you don't mind me asking, it's just that I have thought about insurance many times but always decided against as I don't like giving money to insurance companies unless I have to.
Well – here's what I told Ian, and I thought I'd share my thoughts with you as well.
For 38 years, I'd never given personal insurance a thought…
In March, I'll be 38 and for almost 38 years I have never paid for any type of personal insurance, not life insurance, not critical illness, and not income protection. In fact I was kind of against the thought of it because I have always believed that I would just make enough money that I could fund my own insurance. And living without any responsibilities except me it didn't seem to make sense.
Then I married Arlene and she got pregnant with our daughter, Ahmani, so of course I got the usual speech about sorting out some life insurance.
So I sat down with the guys at Gladfish and discussed my needs. I went in thinking that £250,000 would be enough to get Arlene and Ahmani by until they could sort out my portfolio. What I came out with was £1 million insurance cover with £200,000 critical illness.
But wouldn't that be hideously expensive?
That's what I thought as well. You see, in the mid-90s I had a multi-million dollar contract with a large finance and insurance company, so I know a little about finance and insurance products, and even back then policies were expensive and I wasn't convinced it was worth it. I guess I was being my typical ‘invincible' self the way only a 25-year old can be.
But since those days policy prices have dropped tremendously due mainly to the internet and competition. So it turned out that for £200 per month, both Arlene and I are covered for a million. The best bit is that they advised me to put it in trust so that the policy doesn't become part of my estate. This means that if I die, Arlene gets it all within 30 days rather than having a long wait.
Also, by adding the critical illness part of the policy if either of us are diagnosed with any of 23 different illnesses we receive £200,000.
Why I took the insurance policy out for Arlene as well..
It was for a couple of simple reasons.
First, I have never had to deal with the death of someone close to me, so I thought should the worst happen and I were left with Ahmani, I'd probably just want to get away, go travelling and do something that wouldn't remind me of Arlene.
I think you will agree that a million pounds would allow me to do that.
One of the other reasons is that I have discovered that remortgaging can take time! Real life example: I have a cash property that I am placing a mortgage on and the tenant is refusing to let the valuer in. Three times he has booked in and three times the tenant wasn't there. So what should have taken a month is now three months when you add Christmas and Ahmani being born.
So as much as being a property investor with a large portfolio is great, if you're in a hurry or you simply don't have the head space to deal with remortgages, having a life insurance policy with critical illness is a fantastic comfort.
Finally, and probably most importantly I have a happy wife. If the worst happens and I'm not around to see Ahmani grow up, at least they'll have enough money to live comfortably, be well educated, and never want for anything. That for me makes the £200 a month not only perfectly worth it, but a bargain.
Obviously a million may be wildly over the mark for you, but there are other levels of policy as well. A level of say £250,000 with £50,000 critical illness costs something like £50 per month. Surely this would pay off the home mortgage and sort out the bills?
Anyway, long story short, I'm a convert after buying insurance now. If you're not sure or simply want to find out more then just give the guys at Gladfish a call and they can run through your options with no obligation whatsoever.
Live with passion,
Brett Alegre-Wood
