Updated: Oct 17
Life insurance is not for everyone but if you have a partner, children, and relatives that depend on your income then life insurance is worth considering. In the event of your death, it will cover funeral expenses, mortgage payments and a legacy for your beneficiary. In this article, we will look at what life insurance is and if you should take it.
What is life insurance?
Life insurance is a policy that can pay your beneficiary money as regular payments or as a lump sum when you pass away This policy is designed to reassure your beneficiary that if you as the breadwinner is no longer around, their financial needs will still be taken care of. With life insurance, the level of cover you buy will determine the amount of money that will be paid out.
There are two main types of life insurance:
Term life insurance policies: This lasts for a fixed period such as 10, 20, 30 years usually up to the age of 80, and they only pay-out if you die within those fixed years. Also, no lump sum will be paid at the end of the policy term if you keep up with your monthly premium payments.
Whole life policy: This is a permanent policy that covers you for a lifetime. No matter when you die, this policy will pay-out if you keep up with your monthly premium payments.
What is not covered?
Usually, life insurance covers only death. In cases where you cannot provide for your dependants because of disability or sickness, life insurance will not give you any coverage. Some insurance policies offer terminal policies, but these are not automatically granted due to having to meet the insurer’s health check requirements
Do you need life insurance?
Yes, if you have:
· A family you provide for
· Dependents like children or anyone you look after
· A partner who depends on your income
· If you do not have any of the above but wants to make sure your funeral costs are covered
Who does not need it?
You may not necessarily need life insurance if:
· You are single
· You do not have any dependent
· You or partner make enough for the family and are mortgage-free
· You have a low income and qualify for state benefits
However, always get financial advice if you are not sure. You may think about keeping aside some money for funeral expenses even if you are single, have no children or are married. Many families nowadays struggle to cover funeral costs for their loved ones.
How much does life insurance cost?
Life insurance can be a very good investment. Most times, it is just a small investment that you pay to ensure financial protection for your loved ones in death. And several things will determine the amount you are required to pay for a life insurance policy.
· Your age
· Your health
· Your lifestyle (If you smoke)
· Duration of the policy
· The amount you want to cover
For instance, concerning age, the younger you are, the more unlikely it is for you to die because of a medical condition and the cheaper your life insurance policy rate is likely to be.
Common Misconceptions About Life Insurance
1. Life Insurance Is Expensive
Some life insurance policies are cheaper than others, they are not all equal. The most affordable life insurance policy is the term life insurance that is because it has the lowest monthly premium. You can start term life insurance with as low as £10 a month
2. I Don’t Need Life Insurance Since I’m Not The Breadwinner
While it’s true life insurance is mostly provided by the breadwinner or provider of a majority of the household income, there’s also that added value of having life insurance that covers your funeral costs and leaves a legacy for your spouse or children. If you were to die, it would be hard for the whole family emotionally and financially since there might be a need to pay for an individual to take over those responsibilities currently taken care of by you. For example, as a stay at home mum or dad, you are saving the family up to £800-£1000 on average every month. If something were to happen to you, your family will need to cover theses costs as the child will still need to be looked after if you were to die.
3. My Employer’s Life Insurance Is Enough
Life insurance may be among the benefits you have at your job but relying on that alone is risky because your coverage is dependent on your employment. If you are out of the job, your life insurance ends as well. You may want to consider have a smaller cover in addition to your job’s cover just in case.
4. I’m Too Young For Life Insurance?
No age is too young for life insurance. Life insurance provides policies to cover people of all ages including Usually, when young or middle-aged parents pass on, they leave behind growing children with outstanding debts on car, home, and other major purchases; Having a good life insurance policy can help you plan ahead and ensure beneficiaries of the life insurance policy have fewer out-of-pocket expenses down the road.
Wrap it up
Now that you have a better understanding about what life insurance is and the basic elements of life insurance, we hope we have answered your questions to help you decide if life insurance is something you should have. If you want to find out more information about life insurance and would like a free consultation then complete the contact form and financial certified life insurance and health adviser will be in contact to help you decide the best option for you and your family. In a nutshell, we agree that everyone needs some time of cover, however, how much cover and for how long is what makes each cover unique.