When you are buying a house with your partner or wife, one of the first things you think of doing is making sure you get the correct life cover, and other protection policies in place to protect each other against the worst case scenarios. Unfortunately, not every relationship works out, and there comes a time to start separating things off and moving in your own directions, and one of the things people often do is cancel every financial policy they have with their ex-partner, because it seems like the natural next step. However, if there are children involved, there is no such thing as a truly clean break because you will always have that connection. As such, your need to insure each others’ lives may not change at all, or could even possibly increase.
A prime example of when this need comes into play, is when an ex-partner is paying maintenance to support the upbringing of a child or children. The need here is to protect that income against it stopping, be that from them losing their job, not being able to work due to illness, or death. The easiest one of these to insure against is death, whereby you can take out a family income benefit plan, which is designed to pay a regular income upto a certain date, such as a child’s 18th birthday for example.
Another example is when two people separate, but continue to own a property together for investment or other purposes, and they each help pay for the mortgage. Here, if either party were not able to pay their share, the liability would remain the same, and the responsibility to pay would be the same.
Much thought is needed before cancelling a life assurance or other protection plan. Unlike some types of insurance contract, which you can stop and start without any implication, insurance which is based on the life of a person needs to be re-underwritten at the time you reapply for it. If you have had health problems since you originally took out your insurance, you may find that you struggle to get the same level of cover at a similar price, if you can even get insured at all. Although it’s not a nice way to have to look at things, if your health does take a turn for the worse, and you have a life insurance policy already, the value of that policy goes up because of the increased risk that you may make a claim, and it becomes a lot more important to keep it going, even if that does mean holding on to a policy which you hold with an ex-partner.
Whenever there is a big change in your life, it is important that you review all your finances and have a good think about what your old needs were and your new needs are, and if any of the policies you already have are suitable, consider if it would be beneficial to keep them going.
Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages and investment advice. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Jason Hinde DipPFS
4th February 2013
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