As a single person, I certainly value the fact that I only have to think about myself, and if something happens to me, no one relies on my income to survive. So I just have to make sure that I won’t be a burden for anyone if I were to get sick or permanently disabled, and other than this I’m pretty much set. Things would be much different if I had a family. As my friends are starting to get married and have kids, one of their main concerns if to make sure that everyone will be fine if they aren’t around anymore, or unable to take care of their loved ones. But for young adults, it is sometimes a bit complicated to make sure you are getting the right kind of insurance, and the right level of it. Which is why Drewberry has put together a neat Family Insurance Tool that will help you figure out which is the best insurance package for your family.
It starts with a few questions about your family and your lifestyle.
So I filled it up pretending that my partner and I had a mortgage, a 3 year old to take care of, and that my company would provide 3 months of sick pay if I was unable to work. It seemed pretty standard, although as a self employed person I can only count on my own savings to cover the bills for me.
Which is another question the Family Insurance Tool asks you: How many months could you keep up with your bills using savings? We have talked a lot around here about the importance of savings and how they can buy you freedom, well, they can also buy you lower insurance premiums if you need less replacement income in case of sickness or disability.
Anyway, on to the results. Drewberry split them into three categories: protecting your income, your home, and your kids. Sounds like it pretty much sums it up for the example I inputted.
The income protection part teaches me that only 50% of employers provide 3 months of sick pay and as a 30-something, I have a 47% chance of being unable to work for over 2 months for the rest of my working life.
Well, as a woman, if pregnancy is included, that seems reasonable. I’d rather see the probability of not being able to work for 9 months or more, since I told the software I had 6 months reserves and 3 months sick pay.
Then I am offered income protection to cover my bills, with a reminder that most insurance companies will only cover 50% to 70% of your income, while you can set a 6 or 12 months deferred period to reduce your premiums.
On the home protection advice, I learn that I have an 8.5% chance of dying before retirement.
Again, not much of a scare so far as no one depends on me to pay the rent, but it would be sad to have saved so much just to have the bank repossess my place. The program recommends I protect my partner so he is not left alone paying for too big a mortgage if I pass. As the amount owed on the mortgage decreases each year, they recommend I take a decreasing life insurance to keep premiums low when there is less to repay. Makes sense.
Finally, we move on to family protection. I am glad to learn that I only have a 2.5% chance of dying before my imaginary 3 year old turns 21. But I would still want to protect him/her against those odds, and they happen to offer a policy that will protect Junior until he/she is self sufficient. They suggest 18 years, with the length of studies getting longer I’d say until age 25 probably. Then it all goes backwards, as if there were a Junior around, I wouldn’t want him/her to have to move to a smaller house, a worse school, be uprooted from friends, etc. just because the surviving partner couldn’t pay the mortgage.
So as a worried parent, I’d go back to the protecting my house and income sections. Otherwise as a single person with savings, I’d keep going with the bare minimum to make sure I am not a weight for anyone in case of disability.
What I like about this tool is that it makes you think about some areas you may not have thought about. Then, if you want to have a look at pricing and policies, you get the option to talk to one of their experts or complete an online quotation form, so you can have an idea of how big an impact insuring all those areas could have on your monthly budget.