It's a matter of life insurance and death- mythbusting
There’s nothing like Christmas for making you think about life and death, so this is probably a good time for some research into people’s misconceptions about life insurance, money and death. New research from Gocompare.com , who are probably hoping you will now rush off and buy some life insurance from them RIGHT NOW, have compiled a list of common ‘myths’ that they are busting for your benefit, in the season of goodwill.
18% of Brits believe that if they die their credit card debts die with them.
If you die owing money on your credit cards, your Estate (the sum of all your worldly goods) will have to repay your credit card debts before any assets can be passed on to anyone who you would like to inherit the family silver, for example. However, if you have no assets, your credit card provider cannot pursue anyone else for your individual credit card debts, unless it is a joint credit card account.
44% of Brits believe that life insurance does not pay out for suicide.
Cheery one this, but whether a policy pays out in the case of suicide differs between insurers. However, generally speaking suicide is covered after the policy has been in force for at least one year, but individual policies may vary so do check the small print.
44% of Brits believe that they should tell their life insurer if they start smoking or take up a dangerous sport. 23% think they should tell their life insurer if they change occupation or put on a lot of weight. 48% believe that they should tell their life insurer if they get a serious illness.
Handily, when you take out life insurance the insurance company assesses your risk based on your health, lifestyle, occupation and whether you participate in any dangerous sports or pastimes at that time. Unless you reapply (for example to try and obtain cheaper premiums (see below)) the circumstances at the time of taking out the policy are all that matter.
Provided you answered all of the questions accurately and honestly, you do not need to inform the insurer of any unforeseen changes and changes to your lifestyle will not affect your premium or your chances of your beneficiaries making a successful claim.
People think they should inform their life insurer if they give up smoking, lose lots of weight or give up a dangerous sport
As above, premiums are calculated at a snapshot date, so doing any of these things will not normally affect your premium. Some insurers are prepared to review and possibly lower your premium should you stop smoking. If they will not, and you have given up smoking for 12 months or more, you could consider shopping around for a new policy so that your premium can be calculated as a non-smoker. Similarly, for weight and sports, you could cancel your old policy and get a cheaper one if your circumstances have changed. Always make sure you have appropriate cover in place before cancelling your old policy.
16% of Brits believe that if they die the money goes to their family and they decide which debts to repay
If you die and you have left a will, the beneficiaries will receive the remainder of your estate minus any debts, which must first be repaid together with any inheritance tax liability if applicable. If you have not left a will your estate will be distributed using the rules of intestacy (see below).
Less than 30% of Brits understand what ‘probate' and ‘intestate' mean.
Probate - The legal process of passing on the estate of a deceased person. Contrary to popular belief, you do not avoid the probate process by leaving a will. In fact, the only way you can go to probate is by having a will. Obtaining a ‘Grant of Probate' allows your Executor to distribute the estate according to the instructions laid out in your will, minus any inheritance tax liability if applicable.
Intestate – has nothing to do with any kind of love apples, but is a term that is used when someone dies without leaving a will. In these circumstances, there are strict rules for who gets your cash and assets, and will vary depending on whether you are married and/or have children. There are limits for how much a spouse can get and there is no choice or way of varying what happens, so if in doubt, get a will!
Jeremy Cryer of Gocompare.com folded his hands, arranged his face into an expression of deep concern and said:
"Our research has found that many UK consumers are pretty baffled about what affects their life insurance and what happens to their debts when they die. No one likes to think about what will happen when they die, particularly if it's before reaching a ripe old age, but you owe it to those you'd leave behind to ensure they aren't left in a financial mess when they are trying to pick up the pieces after your death."
Nothing like a cheesy sales pitch cloaked in assiduous concern to make you want to throw up/in the towel/yourself under a train is there?