I have been trying to get my ahead around some statistics that I came across yesterday.
Sainsbury’s commissioned the research looking at how many people in the UK had mortgages with no life cover in place to repay the outstanding balance. The results show some surprisingly big numbers, much bigger than most would perhaps guess.
Firstly the total figure of mortgages without life cover is given at £245,000,000,000 – thats a quarter of a trillion. But ‘billions’ and ‘trillions’ are everyday newspeak terms now, over used by both politicians and news reporters these words have become a sort of TV litter which we therefore tend to ignore as part of the familiar landscape.
Dig a bit deeper into the Sainsbury report figures though and we start to find more meaningful statistics.
The number of people with no life insurance to cover their mortgages? Just under 7 Million, or to put in a more meaningful way that equals just over 4 in every 10 mortgages. The report goes on to break down this figure between different age bands, as follows
Age Percentage of mortgage holders unprotected
Of course within these figures there will be mortgage holders who have valid reasons for not having life cover. The biggest such group will be single people with no dependants – fair enough. Another group might those with significant personal wealth.
But what about all the others? What about the significant majority who are not particularly wealthy but who do have dependent partners and/or families? What about the growing number of older people who find themselves with mortgages much later in life than they had originally anticipated? What are the reasons why these mortgage holders choose to have no life cover?
Here are some of the common reasons people give when asked.
”I’ve never really thought about it.” –
”Its a waste of money – its (my death) will probably never happen ”
”Its too expensive – I can’t afford it”
”No one will insure me with my health conditions”
But for the moment I should mention one other factor which I suspect lurks in the background for many and that is fear. Fear is a great inhibitor in all aspects of life. Fear changes our behaviour, it makes us more cautious, it makes us avoid action, fear makes us hide.
Generally people tend to fear the unknown. I am not a professional psychologist but based on my own observations fear is especially to do with a future outcome that is not known. Often the reason why people don’t face up to their fears is because they are scared as to what the outcome might be if they do. By avoiding action we feel like we are keeping the possible undesired future outcome at bay. Mostly its a subconcious kind of response.
So how does ‘fear’ apply to this issue of life cover for mortgages?
Perhaps underneath these figures many people are frightened about the questions they may be asked if they do apply for life cover. Perhaps they are frightened of having to reveal ’embarassing’ personal medical information about themselves.
Or perhaps they fear the final outcome – the fear that if they apply they they might get turned down and all that that might mean. For example it could confirm their own worst fears that they are going to die sooner rather than later, or in some way mark their financial credit record making it more difficult for them to borrow money in the future if they applied for a loan or mortgage. So some people might choose to avoid applying for life cover in order to avoid some sort of final judgement which they fear might finally mark their cards for good.
But of course fearing something does not mean that it is going to happen.
The problem is that many people are needlessly putting their families at risk by continuing to take no action. Put bluntly if you have no life cover for your mortgage on your family home then your home is at risk. If you have a family you owe it to your family to seek the appropriate life insurance in order to protect the family home for them.
Of course this for many will involve confronting a fear of the unknown.
But if only people with such fears knew where to look they might be quite surprised at the outcome. Here at www.moneysworth.co.uk we offer a specialist service for people with pre existing health conditions who are seeking life cover, for mortgages or for family protection (for other reasons too). Our service is confidential and non judgemental. We have over a number of years developed and refined a process which is designed to help customers find best outcomes. Each case is indivually researched. Further more our service is fee free to our customers and is with no obligation. Therefore it costs nothing to try.
The results are very encouraging. It should be said that we are not able to offer all customers a 100% guarantee that we will be able to find the life cover that they seek but we are able to help the majority, many of whom have been turned down elsewhere before coming to us. Very often the premiums acheived are considerably less than the customer originally feared.
Customers frequently express a high level of satisfaction with our service and often say that a great weight has been lifted for them. With the peace of mind knowing that their dependants are now protected they no longer need to live in fear.
How soon can someone apply for life insurance after suffering a heart attack?
This is a question we are often asked as we receive an increasing amount of enquiries from people who have suffered a heart attack (myocardial infarction). For those affected it is not surprising that their minds should turn to this subject. For having survived a heart attack we are normally given a little while to recover and for many this provides time to consider what the future might hold, especially for our familes and those who financially depend upon us.
For some it can be worrying to realise that they have insufficient life cover to repay the outstanding balance on the mortgage. This means that in the event of their death, amidst and that that would mean to their nearest and dearest, the family home may be at risk as well!
The mind then turns to questions about how difficult it might be to obtain life insurance following a heart attack and how long it might take to arrange for cover to be in place…………..
Well generally speaking the prospects are often better than might at first be assumed.
Firstly if you were over the age of 40 at the time of your heart attack and you have only had one heart attack there is a good chance that you will be able to obtain life insurance. However if your heart attack was severe or if you have further health conditions (eg diabetes) then you may find it difficult to obtain life cover.
Just how long it will take to obtain life cover after your heart attack will vary from one insurance company to another. Generally speaking most life insurance companies will be prepared to offer you cover twelve months after the heart attack and some will even consider offering terms six months.
It may even be possible to do even better than that! We know one or two life companies who may consider applications one month after the client suffering a heart attack, depending on the overall picture.
So if you, or someone you know, has recently suffered a heart attack, if you are worried that you have insufficient life cover in place to sufficiently protect your family, if you think its probably too late to get life cover……… don’t despair. It might be easier to get life cover than you think.
‘There’s nothing worse than an ex-smoker’ it’s said so I’ll start by fessing up to a previous habit. My purpose is not to moralise on the subject (we all make our own choices anyway), I simply want to look at how insurance companies currently view smoking and diabetes. Also just before I get going I should point out that we at Moneysworth help both smoking and non smoking diabetics to obtain life cover, day in day out.
It may seem a bit obvious but we and the life companies all know, as it says on our the packets, that smoking is bad for our health. As mentioned in previous blogs not only do life companies charge significantly higher premiums for smoking, the price differential has been increasing over the years too.
So what about diabetes and smoking? Well did you know that some life companies not only charge extra for both being diabetic and for smoking but also make a further third charge for smoking AND having diabetes? We also know of one major insurance company who automatically decline all type 1 diabetic smokers, regardless of how good the rest of their profile.
So why the nervousness? It’s all to do with cardio vascular risks. Diabetics are at increased risk of cardio vascular events and of course unfortunately diabetes is a progessive illness. Doctors are therefore keen to identify and manage key cardio vascular risk factors in their diabetic patients. Key factors include BMI and a family history of early diagnosis of heart conditions. Many diabetics take statins and in a significant amount of cases this is not due to the patient having a cholesterol problem, but to make sure that they don’t develop one in the future, as this would again provide an additional cardio vascular risk. Blood pressure is another key factor.
Perhaps to some readers the risk of cardio vascular complications for the diabetic does not seem too important or immediate. I would urge such readers to think again. Firstly and most obviously a lot of people do die of heart attacks – and for these the warning signs often come too late ornot at all. Secondly for those diabetics who do manage to survive a heart attack or who are diagnosed with angina for example, the chances of obtaining new life cover currently reduce to nil with all the major UK life companies. I will return to this issue in a later blog.
In the meantime what can smoking diabetics expect when applying for life cover? The truth is that many of them can expect to be declined by a lot of companies. You will save yourself a lot of time and heartache if you use the services of a broker who really specialises in health conditions.
The significance of smoking for Type 2 sufferers who apply for life cover will depend upon the number and seriousness of other additional (especially cardio vascular) risk factors present as well as the level of smoking. At the very least the premiums will be significantly more expensive and at worst the applicant might struggle to get any life cover at all.
For Type 1 sufferers smoking is even worse and applications are even more likely to end in declinature. The reason why is as follows. Type 1 sufferers tend to have already been living with diabetes for a lot longer than the average Type 2 sufferer who is seeking life cover. This means that they generally start at higher rating bands to begin with. This also means that there is less room for the insurance companies to play with in terms of adding extra amounts of ratings for extra complications, before the cases turn into a ‘decline’. It is still possible for some type 1 diabetic smokers to obtain life cover but its more difficult than for type 2 diabetics.
The news for diabetics who are able to give up smoking for at least 12 months is generally more positive as they can still be treated as non smokers by the life companies. Stopping smoking is likely to result in a more favourable attidue from life companies and cheaper premiums.
So in summary our advice for smoking diabetics is
1) Do seriously consider giving up smoking if at all possible, most importantly it will improve your health in the long term and save you a lot of money.
2) When you give up smoking for 12 months do expect life assurance companies to seek to verify this by way of a cotinine test.
3) Don’t however delay purchasing life cover in the meantime. Waiting until you have stopped smoking for 12 months before applying for life cover may leave your family with little or no protection and the prospect of losing the family home. Its better to find cover now and protect your family even if you apply for a lesser am,ount of cover than you would ideally like. Most people will still stand a good chance of benefitting from reduced premiums when you have stopped smoking for 12 months anyway.
4) Use a specialist broker rather than trying to arrnage the life cover yourself – its quicker and you are likely to get a better result. But make sure the broker really is specialist in arranging life cover for diabetics first.
5) If you think it is unlikely that you will choose to stop smoking in the foreseeable future, then work on the basis that it will become more difficult and more expensive to obtain life cover in the future. Get covered now and keep hold of it!
A client recently came to us with a difficult case – subaortic stenosis.
At Moneysworth we do our best to help everyone who comes to us with a health condition to obtain life cover. We deal with a lot of heart related medical conditions, especially heart attacks, angina and heart by passes. However there are of course a number of other heart conditions, including subaortic stenosis.
Like so many who come to us this client was seeking life insurance to cover his mortgage so that the remaining mortgage debt would be cleared in the event of his death, thereby providing him and his family with peace of mind knowing that should the worst happen the family would still have thier home. In this case our client was therefore seeking approximately £150,000 life cover for a 25 year repayment mortgage.
So what made this case difficult? Unfortunately for him, our client was diagnosed in early childhood with his heart condition. Later on in his childhood our client had a surgical proceedure, which could be argued to have been mostly a success, though some some slight leakage was detected for a while after the operation. Over time the leakage appeared to stop and the client now lives a normal life.
We approached a number of insurance companies on behalf of our client who were generally reluctant to agree to provide life insurance. There were no other significant health conditions in this case and clearly most life companies remained nervous about the key underlying health condition – subaortic stenosis. Despite most life companies declining to offer the life insurance we persisted with our search. We know from experience that it does not always follow that every life company will view the same information in the same way and sometimes we have to pass by a number of closed doors before we find one that is open.
Which is exactly what happened in this case. We managed to find a life company who were willing to look at the case differently. After obtaining detailed medical information they were able to view the outcome of the operation more favourably. Whilst they wished to charge a small additional amount to reflect some additional risk, they did not regard the additional health risk factors to be significant enough to warrant declining our client’s application.
So the hard work and patience payed off and in the end we were able to acheive a very positive outcome for our client. Not only were we able to find the total amount of cover that our client was seeking, but we were able to do so at a very attractive premium of less than £17pm.
What a great result!
It has all the hallmarks of a classic taboo subject – business owners know that there is a risk to their business lurking in the background somewhere and evertime they think about it they feel vaguely uncomfortable. But the easiest thing for a business owner to do is to move swiftly on to something else. After all its not exactly a problem today and it might not even happen………
So what’s taboo? Death of course, or rather death and serious illness. To be more specific its the effect that these two events can have on a business, especially small and medium sized businesses.
If you want some proof how about this for a stat – ”39% of business owners expected their businesses to fold within the death or critical illness of a business owner”.
Here’s another one – ”58% of businesses had no formal agreement to establish what would happen in the event of the death or critical illness of a business owner”.
[source – Intsitute of Directors and Legal and General – Business Protection Research]
‘Does it really matter?’ you might ask.
The question can be answered both quantitively and qualitively.
First the numbers – according to mortality data at http://www.actuaries.org.uk/ the following is true. Take a business with three male shareholders all aged 40 – the chances of one of them dying before the age of 65 is 19%. Thats quite scary – its going to happen a lot! The chances of one of the same three suffering a critical illness before the age of 65 is 64% – and thats very scary, a probability rather than a possibility.
But the qualitive answer is perhaps even more worrying. Because most people tend to ovoid spending time thinking about this issue, they do not consider the potential consequences. These could include but are not limited to the following
1) The bank might seek to call in personal guarantees regardless of the wishes of the business owners (and yes that could mean your home is at risk).
2) The business trying to raise a significant loan to buy out the shares of the deceased party
3) The business owners may have to try to raise the money required from personal assets such as the family home
4 The business taking on considerable new loan costs to repay the loan
5) At the same time the business suffering a fall in income and profits as a result of the loss of the business owner
6) Therefore the bank may not even agree to fund the share buy back, especially if trading conditions are not ideal, or if the bank lending is constrained due to general economic conditions
7) In the absence of commercial funding being available to the company or the remaining shareholders the family holding the estate of the shareholder may be forced to seek an external third party share purchaser
As someone who has faced this situation in business in real life I can assure you that these sort of risks are very real and potentially very damaging. In our particular case it was serious illness rather than death. Our first thoughts were obviously with the shareholder and his family -thank goodness he made a recovery, though it took some (very worrying) time before he knew that this would be the final outcome. During which time not surprisingly he decided that his priorities had changed and he no longer wanted to be involved with the business. Luckily for us we had the correct life/ critical illness policies and legal agreements in place which meant that at the right time the required funds were in place to finance the share purchase and with no need to take on additional debt. At the same time our eyes were opened to the consequences of how differently things might have turned out had we not been properly insured.
Here’s an odd thing – most businesses think nothing of insuring their business premises for fire. They don’t do so because there is a high risk of the insured event actually occuring, they do it because of the size of the potential financial consequences for the business that would follow a fire. Literally a fire could destroy an unprotected business.
So given the fact that the death or critical illness of a business partner or shareholder is so much more likely to actually occur it might be said that any of the 58% of businesses with no plan referred to in the research (above) are very playing with fire. Sensible action would be to take expert advice on the matter before its too late.