101. Protecting the Future: Life Insurance and Financial Protection ft Ella Ensures

In this episode, we're discussing Life Insurance and the importance of having insurance policies to protect your finances. To do this, we're joined by Insurance Advisor Ella or Ella Ensures who breaks down the different types of policies available and at which points in life you should consider taking them out.

FOLLOW ELLA:
Instagram - https://www.instagram.com/ellaensures/

Chapters

• 0:00 Understanding Different Types of Insurance
• 11:49 Importance of Life Insurance, Starting Conversation
• 19:30 Broaching the Topic of Life Insurance

Transcript

Speaker 1: 0:00

Hey guys and welcome back to the Penny Spouse podcast with your host, kia, and this is the podcast we aim to destroy your myths, simplify difficult financial struggle and rectify your own personal problems. Happy Monday, everyone. It's always great to be back with a brand new episode. Last week was a really good one, talking about the right to buy scheme and second time buyers, so if you haven't listened to that and you think that will appeal to you, make sure you stop this one and go back before you come back to this one.

Speaker 1: 0:23

However, this is a very important topic and I really wanted to cover this one because it's not something that we often talk about. Whenever you bring up the thoughts of illness, critical illness or death, everyone, especially your parents parents they say don't do that, you're trying to kill me off, we don't want to hear about it. However, it's really important to make sure that you are covered financially and your parents. When it comes to those situations that we don't want to think about, what we know we need to plan for. So, to cover this topic and go into more depth about it, I have got an amazing guest of me. Guest who are you?

Speaker 2: 0:54

So my name is Ella, I am a finance expert, but I specialize in insurance, so basically I'm the person that protects everyone's money.

Speaker 1: 1:03

Yes, you are the person that we need in life to make sure that we are completely covered. Yes, so, because we're in the month of January. Before we get into this episode, I'm asking all of our guests have you got any resolutions this year? And if you do, what are they?

Speaker 2: 1:16

Oh, I'm not really someone that makes resolutions, so to speak. I more try to develop, like, say, habits, consistency, because I feel like the pain of when you don't fulfill a resolution or when you follow it.

Speaker 1: 1:32

I just like ah let's just start again.

Speaker 2: 1:33

Do you know what I mean? So, yes, I've made lots of goals this year. I've mapped out loads of strategies, but definitely I want to take sort of my personal life, health, fitness, those sorts of things. I definitely want to sort of prioritize those a bit this year, I feel like that's a good way.

Speaker 1: 1:50

I feel like you're not alone in not making resolutions. I didn't really make resolutions either. I just had goals. But I think, like I said, the new resolution was I want to do this. New year, new me new year, new me.

Speaker 2: 1:59

You drive Jan everything.

Speaker 1: 2:01

And then, within a couple of weeks, you stop it.

Speaker 2: 2:02

And you feel like there's no point. You get to January 20th, you're falling off. You're like, oh my gosh. You're like oh, there's no point now. I may just get thrown in a bin.

Speaker 1: 2:10

But with goals you can kind of stick to it for like the year. So I like that approach that you're taking. But let's get straight to this episode then. Cool, life insurance. Yes, this is a term that, if I think back to me growing up, that's the thing that I don't need because I'm young. Right, my parents should need it because they're old, yeah, but even then, are they even interested in that Exactly? So talk to us from the beginning. What exactly is life insurance?

Speaker 2: 2:33

So life insurance. So there's loads of different insurance policies, life insurance being the most common because it's the one that's promoted on TV the most. But life insurance essentially is money available to whoever in the event of someone passing away. So if you and I was to pass away and we had a life insurance policy, money is paid out off the back of that Different policies depending on a term. So how long the life insurance policy lasts, the way it's paid out, whether it's like a lump sum, whether it's a monthly amount, so there's loads of different, varying policies that all kind of depends on your needs and circumstances. But literally, someone passes away, money's paid out, okay.

Speaker 1: 3:10

That makes sense and that's a good thing to have, because sometimes you will have loved ones pass away and if you're not prepared financially, that can be a massive burden on you 100%. So life insurance aims to basically bridge that gap. So you have that from there. So let's go a bit deeper then. What are the different types out there? Because I'm sure many people listening and watching will just assume okay, I need to get life insurance, life insurance and I'm just gonna get that one, but what? Are the variants?

Speaker 2: 3:37

that are out there. So when it comes to life insurance specifically, there's the most common one, which people kind of see on the TV, and that's a lump sum payout 200,000, 500,000, whatever it's usually within a term. In a term is always gonna be the most cost effective, because essentially what we're saying is the policy is gonna last for a certain period of time. If anything happens within that timeframe, the money's paid out. So lump sum being sort of the most familiar. But then you've got a decreasing policy which usually kind of sits in line with mortgages.

Speaker 2: 4:07

So many people will take out a mortgage. It's 200,000, of course, each month that you pay off your mortgage, your mortgage gets less and less, and so that's why the life insurance policy is called a decreasing term, because also the life insurance policy gets less and less. So it literally runs alongside or in line with your mortgage, but essentially the payout is exactly the same. It's within a particular term. If someone passes away, the money's paid out.

Speaker 2: 4:32

There's loads of sort of like guarantees as well, you know, like in case you remortgage or the value of the mortgage gets bigger or you need to change the term of the mortgage. So there's loads of different things that you can have like built in within the policy, but literally the same, it's just that it decreases rather than it being a lump sum. There's also, then, another one, which is a whole of life policy, which is the one that most people, when they're looking online and they see all of the Americans talking about it, are like oh, can we get this one, can we get this one? This is generally the most expensive of the policies, but tend to be the most common against or for people who are older, because this one has no term, so to speak. Or, to be fair, it does have a term, but the term is like a minimum of 100 years which chances are.

Speaker 2: 5:15

That's all, no one's out. No one's out living that. So usually with that policy, you know, you take out, say, 30,000, 50,000, 10,000, because the logic is that you want to leave behind some form of inheritance or you just want to make sure that you've mitigated any form of funeral costs or anything like that. Those who are quite wealthy tend to take that out in relation to, like, inheritance tax, if they know, obviously, they've valued up their assets and they're of a certain amount, and at least that way it's like I'm guaranteeing that the assets are going to be passed on in full and then those who receive them aren't going to have to pay the 40% inheritance tax because the insurance is also taking care of that as well. So, yeah, so three different types of life insurance policies that pay out in that way.

Speaker 2: 5:58

There's also, then, another type of insurance life insurance again that is known as family income benefit and that one pays out a monthly amount, but it's literally like what it says on the team family income. So think of it as literally like a monthly income that's paid out again when someone passes away, but it's more to support family. So if you've got children or you've got anyone that's dependent on you, rather than putting a putting a large lump sum in someone's hands and expecting them to be responsible, you can pay out a monthly income for a certain period of time, which usually just kind of helps to take care of those responsibilities. Life kind of remains the same, financially, pretty much. So that's kind of life insurance as a whole. And then there's two other types of policies that are insurance in general.

Speaker 2: 6:44

Let's go, let's say the other two, okay, right, so my favorite is income protection.

Speaker 1: 6:48

Yes, I am a big fan of income protection.

Speaker 2: 6:51

Okay, income protection. I'm just like. If you're thinking of any type of insurance, just start with income protection, no matter what your circumstances are, because it's the one policy that does everything that literally all of the other policies do. So, in a nutshell, if someone's too sick to work or too sick to carry out their daily activities, you receive a salary based on what you earn. So if you're on benefits and you're not earning, then they will take that into account and it's capped. If you are earning, then it usually pays out anywhere between like 60 and 70% Different. You know complexities and terms. Some will pay out for 12 months, some will pay out for two years, five years or the lifetime of the policy. No matter what, though, if you're sick and you can't work, you're getting money every month. What people don't realize is that income protection covers you for sickness, no matter the severity.

Speaker 1: 7:39

You just have to be signed off.

Speaker 2: 7:40

So what that means is it covers you for COVID, your bad back, your broken leg, a critical illness, cancer, etc. And there is a life insurance element built in to all income protection policies. So no matter who's got an income protection policy, nine times out of 10, there's either a 5,000 or a 10,000 pound sum built into the policy that, if you still passed away, that money's paid out. So income protection is the only policy that does everything that all of the other policies do. That's why I say to everyone literally start with income protection first and, like what we were saying in terms of goals everyone's got financial goals and etc.

Speaker 2: 8:15

Income protection is the one that protects all of those. Because if you think about it like, if you're not earning any money because you're sick, the emergency fund is protected because the income protection kicks in. Your savings are protected, income protection kicks in. You know your credit is protected because you haven't had to rely on credit to maintain your monthly lifestyle. You know you haven't fallen into debt, you haven't missed any payment. So it's literally the policy that does for me the most. Even if you've got like a six month you know sick pay policy with work, still get it, because I think we're definitely in a generation now where people are job hopping sooner and more often than ever and income protection follows you. It's not tied into your workplace, even though it's based on what type of work, what type of work that you do? So for me, that's why income protection, if you've got minimal budget or you only want to prioritize one policy, that's the policy to do, that's the one that kind of covers everything.

Speaker 2: 9:07

Literally like even think about it as a mortgage. You may not have life insurance to cover the mortgage amount, but you've got income protection that, again, if you're too sick, you can still afford to pay your mortgage. So that's why I always say income protection for me is first, definitely Critical. Illness cover is then the other type of policy. Literally is what it says on the tin. If you're diagnosed with a critical illness, every single provider has a list of definitions, whether it be cancer, heart attack, stroke, multiple sclerosis, significant mental health, like schizophrenia, etc. If you get diagnosed with one of those, literally upon a consultation, confirmation that you're diagnosed, you get a lump sum payout Literally as simple as that 50,000, 100,000, whatever it is, and it's tax-free. All of the policies are tax-free and all of the policies, regardless of whether you make a full recovery or not, you're not paying any of the money back. They're literally there for you to use as you see fit.

Speaker 1: 10:03

That is so good. That breakdown was incredible by the way.

Speaker 2: 10:07

Thank you so much.

Speaker 1: 10:08

Just before we go back to life insurance, I want to say income protection. Yeah, when you mentioned that, it reminded me of one point. I was working this job and you know you're in your probationary period.

Speaker 2: 10:18

I think I was in my sixth-in-probationary period, yeah.

Speaker 1: 10:20

And I had got into an accident not fatal, but I had broken my arm so I signed off work. Wow, and I had. So I signed off for a month but ended up being two months, I believe. So I couldn't cover. But I had one more week on my probation left, which meant I wasn't eligible for six pay. They said if you broke in your arm a week later you could have gotten six pay. So I worked two months unpaid and that was the most stressful two months of my entire life.

Speaker 1: 10:45

And I mean even that response and that logic like I didn't want to break my arm in the first place.

Speaker 2: 10:49

I was like, let alone break it a week earlier, Like what I think this is the problem as well that there is no, there's no bridging between that. You know, if there's, if you're not entitled to sick pay, you're not entitled to anything.

Speaker 1: 11:03

And if you're self-employed, there is no sick pay. Do you know what I mean?

Speaker 2: 11:05

So at least with income protection, you're just. You're just covered, no matter what the circumstance. So, like I said, no matter the severity of the illness, I've had clients that are literally diagnosed with a critical illness, but they've had a critical illness policy and income protection and they've used both. That's good.

Speaker 1: 11:20

So yeah, it's, that's what I'm saying. I think it's really good to know what is out there, and that's what you've been covering enough. So I'm glad that we are covering it now on this episode.

Speaker 1: 11:28

Let's go back to life insurance then to you gave three different types of life insurance in the beginning. So for someone who's listened and said, right, these are great. How can they know which one is best for them to pick, based on, like, their financial goals or their lifestyle circumstances? Because you might say, maybe it's Lamsan, maybe it's the payout, maybe it's the family. I don't know which one.

Speaker 2: 11:47

I should go, for how can they?

Speaker 1: 11:48

figure that out.

Speaker 2: 11:49

To be honest, I usually recommend that no one does try to figure it out. I mean, obviously I'm an advisor so I'm biased, but I always say to someone try and have a conversation with an advisor, just because of course we're trained in that space, so we know what questions to ask you, what things to take into consideration. But I think the main question that anyone wants to ask themselves is do I have any responsibilities? Do I have any goals that I'll go into? Exist beyond me these children, mortgage supporting loved ones, funeral responsibilities, bills, outstanding debts, whatever it is?

Speaker 2: 12:23

If the answer is yes, then you need some form of insurance, because literally insurance is like, if we think about it, we get out, we go to work, we earn our money and that money sort of contributes towards lifestyle, like I said, savings goals and etc. Life insurance is what puts you back in the race being able to do all of those things, even though you might now be at a disadvantage. Do you know what I mean? Obviously, you've passed away, but those things still exist. Life goes on. Sorry that you've passed away, but life goes on.

Speaker 2: 12:53

So that's like I said a funeral bill still needs to be paid, a mortgage still needs to be paid off, debts might still need to be paid off. Unfortunately, in the UK, debts don't die with you, they don't. They live on, they live on. Do you see what I mean? So that's what I'm saying. That race carries on going and life insurance kind of puts you back in the race at the same pace that you were running it before, but just mitigating all of those circumstances and you know, time isn't always on our hands, we don't always have the time to save up a hundred thousand pounds in the bank so that at any given moment, if anything happens, you've got that sitting there to use.

Speaker 2: 13:24

Yeah, literally so it's. I don't always say that it's so much about what type of policy you get, but just more so what you might need the policy for. So to just ask yourself is there anything that needs to be taken care of financially if I'm no longer here, whether that's people, or whether that's assets, debts, whatever it is? So let's have a conversation and then that way you can kind of work out what type of policy, because there's loads of things that come into consideration as well, Affordability being a massive one. I always say to people don't worry about affordability, because there literally is a policy for everyone, no matter your affordability, because you can adjust it based on how much or how little you can afford to take. But just as long as you have the conversation, then we can adjust what type of policy, how much of that policy and life insurance, like there's no terms. You can take out as much life insurance as you want. You can take a policy today, next year, next month, next century, whatever it is.

Speaker 1: 14:17

You know what I mean.

Speaker 2: 14:17

Get as much cover as you can afford, or as little, but just as long as you've got something.

Speaker 1: 14:21

Yeah, I think that's the main thing that is running through this episode is just make sure that you look into having something so you're protected. Your assets, everything but the thing that you work so hard for you want to make sure that they're covered and protected.

Speaker 2: 14:33

Thank you. There's so much chatter around creating generational wealth and I feel like a lot of the times we forget the generations.

Speaker 1: 14:42

We've created the wealth, and now what about the generations?

Speaker 2: 14:45

And insurance literally does that. It makes sure the generations that you created it for get it.

Speaker 1: 14:49

But that's what we need to make sure that we're covering and protecting, like you said, Life insurance. Like I mentioned in the beginning, life insurance is like pensions. Whenever I tell people about those kind of things, they sonomize it with old right Life insurance is like oh, I'm not old enough.

Speaker 1: 15:04

Pensions oh, I'm not old enough. What would you say is like an idol. Is there no better question? Is there an idol age that someone should be looking to take out life insurance? Or even just asking them themselves some questions when it comes to taking out policy, when it comes to life insurance, income protection, anything like that?

Speaker 2: 15:23

The minute you start earning literally, if you think about it, the minute you are earning, you are now responsible for yourself financially. Even if you're living at home with parents, you're still financially responsible for yourself. So I think it's definitely at that point that you need to start considering insurance and also as well. Insurance is the one part of financial literacy that you don't have to learn If you think about it. You have to learn discipline, you have to learn how to save the difference between high-yield savings accounts. Do I need a nicer? You don't have to learn insurance. You just take out the policy. It does what it needs to do without you having to do anything. So that's why I say, the minute you start earning, start considering, because then at least that way, whatever journey road that you're on, regardless of how much you're earning, et cetera, life insurance is there to literally support you or be a backup, no matter what. So, yeah, I mean you can get insurance literally from some policies from as early as age 16. Some, the majority, are from about age 18. But yeah, I would say, from the minute you start earning, it's a consideration, and then also, you're training yourself to become comfortable with that responsibility, the amount of times people, because with insurance you don't see any immediate benefit.

Speaker 2: 16:36

That's the thing. There's no immediate benefit Like if I take out this policy today I can take advantage of it and get what. It's not like savings the minute you save as little as, say, five pounds, in 12 months time you can see a return on your investment. It's not like that. So I think it's getting comfortable with that expense as well and understanding I'm not gonna see any immediate return, but at least I know that. God forbid, if the worst happens it's there. So let me just get comfortable with seeing 25 pounds, 30 pounds, and leave my account every month. And to be fair, I'm saying no return. But to be fair, a lot of the providers have sort of changed their policy since COVID and they're delivering and offering so much more now. Before it was literally just insurance, that's it. Now you're getting half price gym memberships.

Speaker 2: 17:22

Oh I love that Now you're getting free coffee. We love good perks.

Speaker 1: 17:25

Cinema tickets. Do you know what?

Speaker 2: 17:26

I mean they're taking a more sort of informed approach so that you can take control of your health. So you're getting like blood tests to see how healthy you are, mental health sessions included for free, physio, like the list goes on. So, to be fair, there are a lot more things that you can redeem now just by having the policy. But yeah, the minute you start earning, I would say it's something to consider.

Speaker 1: 17:45

I think that's really good. Like I said when that happened to me with my arm, that's something that I wish I knew about and I had, because I probably would have said, oh, it doesn't matter, my work's not going to pay me out, but I've got this, I've got this. Yeah, but I didn't have that in that moment. I think it is like I said, once you start earning, it's so important to make sure that you've got that there Now.

Speaker 1: 18:00

On the flip side then there are people I've had many conversations with friends, just people in general life insurance and parents right.

Speaker 2: 18:07

Anything to do is deaf.

Speaker 1: 18:09

Parents don't want to hear about it right. A lot depending on what kind of background you're from. So I'm from Caribbean background.

Speaker 2: 18:14

Yeah, me too.

Speaker 1: 18:15

I talk about that. My dad said you're trying to take my money from me.

Speaker 1: 18:17

I'm not at Pops. You're trying to wish me where. What do you want me to hear anymore? I'm like who said that? Who said that I want you here as long as possible, but I need to know what it is if you're done. Yeah, exactly, but parents always get in his mind that you bring up anything like that and that's their immediate reaction. So what would you say to any kids who don't know their parents have life insurance or want to kind of start that conversation like mom, do you have it? Dad, do you have it? Obviously, I know the older you are, probably the more expensive it will be. If you took out 50, 55, you're going to get a lot more for it because you're closer to maybe throwing out at it 100%.

Speaker 1: 18:52

But what would you say to someone who wants to have that conversation with their parents and is just not sure how to broach that?

Speaker 2: 18:57

I think the easiest way to approach it is almost to have cover in place yourself, or to at least have looked into it, because then you can ask the question and you can say mom, dad, just in case anything happens to me. I did this the other day because I don't want you to have to pay for me. I'm trying to be responsible for myself. But let me ask you the question have you guys got something? Because I'm not sure if I've got 10 or 20,000 pounds available that if anything happens to you guys and I want to just make sure that I can give the best, make you as comfortable as possible. I think it's more about broaching the conversation that way than just sort of have you guys got life insurance? Who's paying for the funeral? Do you know what I mean?

Speaker 2: 19:37

It's not me, but that's the reality and I think as well, things change as well. You know, like you have parents, and parents are responsible for their children, and especially within certain cultures, as parents get older, the responsibility reverses. Where the children now become responsible for the parents, and that's fair, then If that's the case, then I'm being responsible, mum, I'm asking you the question. So then that way, if you don't, then we can put in place a policy. I can pay for the policy, so I'm still be responsible for you. But you got to own the policy because the insurance is on your life, not mine. So it's just about broaching it that way, like, look, I've done something responsible for me because I don't want to be a burden on you. So, by the same token, meet me halfway and let me ask you that question. So then that way I know where I stand if anything happens to you.

Speaker 1: 20:28

I think that's a really good way to broach it. I think that's a nice way. A nice way, yeah, that's a nice way, and that's why I always say to people when even just asking about finances in general, if you want to start a conversation and open up with your friends, you can say I'm saving towards this, what?

Speaker 2: 20:41

are you saving towards? What are you saving towards?

Speaker 1: 20:42

I think it's good to say I'm doing this. I've even feel more comfortable, like you said.

Speaker 2: 20:46

Literally, and I think with parents as well. We've got to massage their egos a little bit. We've got to let them know, like look, all the things that you taught me, see, look.

Speaker 1: 20:55

I'm really doing it, mum, I heard you, I heard you, I heard you Do.

Speaker 2: 20:59

You know what I mean, but, like you said, it's literally the same thing, like I'm doing this. So what are you doing? It's just an easier way to approach this because when it comes to finances in general, everyone to an extent either feels attacked, feels uncomfortable, doesn't want to share like they can't trust, or et cetera. I mean, if none of those things are a factor, then fine, just have the conversation. But nine times out of 10 they are, because especially us as British individuals you know, we're so sort of, we keep everything close to our chest when it comes to finances People don't even want to share their salaries. People you're asking them oh, how much you earning them? Why, why, why.

Speaker 1: 21:30

Don't want to talk about it at all. Because I'm just trying to make sure I get paid fairly. That's all I don't want to take from you. You want to say the job. I'm just hoping that we're getting paid the same, literally.

Speaker 2: 21:39

So I think, yeah, I think it's sort of like softening that blow and, coming from a place, of this is where I'm at, where are you at? Let's meet each other in the middle somehow. I love that. I think that's a really good way.

Speaker 1: 21:48

So, to round up this episode then, what are your three tips that you want to leave our listeners with when it comes to life insurance? So, when it comes to even getting out of policy, what are you looking for anything when it comes to life insurance? Just the three things to leave our listeners with.

Speaker 2: 22:02

I think the first one is have you considered any financial goals? If you have, and, like I said, as big or as little it might, just a big financial goal for some people is just to live life on their terms, literally just to live a comfortable lifestyle, doing what they want, as they please, et cetera getting up, going to work, going to the gym, et cetera. If there's anything that's going to be impacted, consider some form of insurance. It's literally just mitigating loss and I think to think of it in the same way that we think of car insurance. No one gets in a car and thinks I'm going to have a crash today.

Speaker 1: 22:35

Nope, you do not think that.

Speaker 2: 22:37

But we definitely think about, let me get my car insurance. Apart from the fact that it's you know, it's a legal requirement. Yeah, I mean you kind of have to but equally no one thinks or everyone thinks. You know, if I crash my car, I'm not trying to spend X amount with the mechanic and then in case I have an accident and then the other person's car, as well, or even like breakdown cover.

Speaker 1: 22:56

Breakdown cover, you think your car's going to be fine until you stop, and then you're like, oh my gosh, I need to break that cover, because what am I going to do?

Speaker 2: 23:02

Yeah. So it's literally not stealing from your financial goals, your emergency fund, your savings, your investments, your assets, whatever it is to fund something that doesn't need to be funded when there's insurance to take care of it. So consider financial goals. If you've got them, consider insurance to protect them. The second thing as well is responsibilities. So, aside from financial goals, is there anything that you're responsible for financially in life or in death? What's going to happen? And if you're trying to be responsible, then definitely consider some form of insurance. And then I guess the third tip is, at the point of considering insurance, definitely read around, have a look to see what you think is applicable to you, understand sort of what your appetite for insurance is, you know what's comfortable in terms of affordability. But then I would say, definitely have a conversation with an advisor.

Speaker 2: 23:52

Consultations with advisors are completely free. We don't charge. You can always walk away with quotes and the information, but the sooner you do it the better, because health plays a factor, age plays a factor and unfortunately we can't control those two things. And once they kick in, the policy costs what the policy costs. There is an insurance policy for everyone, no matter your age or your health status. So regardless of how sick you are, there's a policy for everyone. But just have that conversation sooner rather than later. So you've got the information, ella. Thank you so much.

Speaker 1: 24:25

This has been such an insightful episode genuinely I think if anyone here had no idea about life insurance. They are definitely very crude up.

Speaker 2: 24:33

I'm ready to go into it tomorrow and say do you have life insurance? Yeah, yeah, yeah, Let me tell you about it. Let me tell you about it.

Speaker 1: 24:38

Thanks, duce. Thank you so much. You're welcome For everyone listening and watching who wants to get in touch with you and follow what you do when can they find you?

Speaker 2: 24:44

So you can find me on social media, ella inshores, e-l-l-a-e-n-s-u-r-e-s, or on my socials. You'll have a link to my website. So, ellainshorescouk, or drop me an email officeatellainshorescouk.

Speaker 1: 25:00

Amazing thank you so, so much, and everyone listening and watching. Thank you and we're back again next week with another episode. Bye, guys.