Many people often wonder whether they need to take out life insurance. The truth is that whether you need life insurance very much depends on your own personal needs and circumstances.
No two people are the same. We’re all at different stages of our lives and as such, we all have different requirements.
If you’re looking at taking out cover protection, you’ve come to the right article.
Let’s take a deeper look at this topic…
Why do I need life insurance? :
As a general rule, If you have anyone that depends on you financially, you’ll likely benefit from having life cover in place.
If you’re unsure whether or not life insurance is right for you, you can ask yourself two simple questions:
- Would my loved ones struggle to continue their existing lifestyle without my financial input?
- Would the cost of my death have a major financial impact on my loved ones?
If the answer is yes, it’s likely that having life insurance is very important.
No one likes to think about what life will be like when they’re no longer around but if you’ve got a family it’s important to do so to ensure you have the right cover in place to protect them.
Life insurance acts as a safety net that will protect your loved ones when you’re no longer around to do so.
If you were to pass away, with the loss of your income, could your dependants:
- Afford the monthly mortgage?
- Meet day-to-day family living costs?
- Meet additional childcare costs?
- Cover the cost of your funeral?
- Pay off any debts in your name?
Do I need life insurance if I am single? :
Generally speaking, if you don’t have anyone that relies on you financially it may not be essential for you to have life cover.
Therefore, if you’re single it’s likely that you may not need life insurance.
However, if you were to pass away, the cost of your funeral will become the responsibility of your next of kin; your parents, siblings or other family members.
With this in mind, it’s important to know that the average cost of a funeral in the UK is on the increase – having risen 130% over the last 16 years. Resulting in the average cost of dying reaching nearly £10,000.
For many families, it would be hard to raise such funds at very short notice. Therefore, having life cover in place to pay for your funeral can be beneficial to relieve your loved ones of this expense.
Another thing to bear in mind is that, although you may be single now, in the future you may want to start a family.
Taking out life insurance while you’re young and healthy can lead to you paying lower premiums and means that, when you do start a family, you’re prepared for a worst-case scenario.
Check out the infographic below from award-winning life insurance broker, Reassured, to help answer the question ‘do I need life insurance?’
What life insurance do I need? :
Once you’ve decided that you want to take out life insurance, you need to decide what type of cover will best suit your needs.
The type of life insurance you need will depend on what you’re wanting to cover. There are different types of life insurance, each well suited to protecting different aspects of your life.
Term based life insurance
Term-based life insurance covers you for a specified period of time. If you pass away during this time, a pay out is made.
You’ll pay a monthly premium for your cover and can choose from level (stays the same) or decreasing (reduces over time) terms.
Whole of life insurance
Alternatively, there’s whole of life insurance which provides lifetime cover. This means that your loved ones are guaranteed a payout when you pass away (not if).
You’ll continue to pay premiums for the rest of your life to keep the cover in place. Due to this, whole of life is well suited to those later in life who’re in good health.
Over 50s plan
An over 50s plan guarantees acceptance to UK residents aged 50 – 85. Unlike term-based or whole of life insurance, you won’t have to provide any medical information.
An over 50s plan is ideal for those who’re later in life with poor health.
Family income benefit
Family income benefit (FIB) is an alternative type of term-based life insurance.
Rather than your loved ones receiving a lump sum payout if the worst were to happen, they’ll receive monthly (tax-free) income payments.
Death in service :
It may be that you receive death in service benefit through your employment. This is where your employer will pay out a lump sum to your loved ones if you pass away during your employment (usually 2 – 4 times your annual salary).
This will help to provide some financial aid if the worst were to happen but doesn’t mean that life insurance isn’t necessary.
If you think about all the things that need to be covered if the worst were to happen, would this payout amount be enough?
Depending on your budget it can be beneficial to have both death in service as well as life insurance. This is because if you leave your employment, the benefit doesn’t go with you.
This can leave you uncovered at a later stage of your life. When you have your own personal cover, you can choose how long you would like to be covered for and how much cover you would like.
Whether you need life insurance or not will depend on your own personal life circumstances.
If you have family that depend on you financially, life insurance is essential to protect them from any financial stress that may occur if you were to pass away.
If you’re unsure about the process of obtaining life insurance, you can use an FCA regulated broker service, like Reassured.
A broker service can take you through the whole process and compare quotes on your behalf to find the right cover at the right price.
This post complies with my Disclosure Policy.