why you need life insurance

Why have Life Insurance?

Life insurance gives your loved ones a lump sum when you pass away or if you’re diagnosed with a terminal illness. You should consider a life insurance policy if you have children or loved ones who are financially dependent on you. They can use the money for anything, like paying off your mortgage and funeral costs.

Buying a Life insurance policy offers peace of mind when someone dies by providing money to your beneficiaries – usually family members but this could also include anyone you choose as beneficiaries.

Life insurance provides peace of mind to you and your loved ones by covering funeral and debt expenses after your passing.Debt doesn’t disappear with death, so you should ensure your life insurance policy provides enough coverage to address the debts left behind by you and provide funds for funeral costs or to replace lost income from you 

What are the different types of life insurance?

There are two types of life insurance policies – term life insurance and whole of life insurance.

The MAIN ONE –  which is most popular and cheaper of the two is Term life insurance, which typically covers you for the term of your mortgage, or upto age 70 if you prefer. If you pass away within the policy term, your loved ones get a lump sum.

Whole of life insurance lasts your whole life – i.e. until you pass away.  So if you died at age 102, as long as you had maintained the montlhy insuramce premiums, it would pay out.  Your family get a guaranteed lump sum. The policy only ends when you pass away, so the monthly premiums are more expensive.

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How much money should you leave your family?

You need it to cover:

  • How much is left to pay off on your mortgage 
  • Other debts you need to pay off, like credit cards and loans
  • Money you’d need for childcare or education
  • Money your family may need to cover your funeral 

How much does life insurance cost?

How much you pay for life insurance depends on things like:

  • How much cover you need e.g. to cover a mortgage or school fees
  • Your health and lifestyle, including previous conditions or smoking
  • Whether you have a high-risk job such as a firefighter 

 

Life insurance starts from just £5 a month! 

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Reasons to get Life Insurance
1. So they’re financially comfortable

When someone loses their partner, their family’s finances will usually suffer, regardless of whether the partner was the main earner or not. 

In a recent survey, families whose partner had life insurance were more confident about their financial situation than those who didn’t. Consequently 69% of families without life insurance felt financially comfortable before their partner died. This fell to 33% after their partner’s death. 

On the other hand, 81% of families with life insurance felt financially comfortable before their partner’s death, and this dropped to 58% afterward. 

Life insurance pays out a lump sum of money tax-free if the policyholder dies within a certain period. This payout can help support the loved ones left behind and make them feel more financially secure. The policy also pays out if the policyholder is diagnosed with a terminal illness.

2. So they don’t have to move home

Buying Life insurance cover can provide a safety net for your family in case you pass away within the policy term. If your loved ones make a valid claim, they could receive a payout that can be used to pay off the mortgage or rent, and avoid moving to a cheaper home during a difficult time.

A recent survey found that one-third of people whose partner died in the last five years had to move out of their home, with almost half of them having to downsize due to financial difficulties. 

More than half of those whose partner did not have life insurance had to move simply because of financial reasons. However, those whose partner had a life insurance policy were less likely to move due to financial reasons.

3. So they’re prepared for unexpected costs

In the same survey, married and cohabiting couples who had no life insurance were more vulnerable to financial shock if their partner passed away, compared with those who had life cover. So if an unexpected cost cropped up – things like a car needing work, – they’d struggle to afford it, or might need to borrow money.

So life insurance can help with more than just regular costs, and staying in the family home. It can help put a family in a better financial position, and make them more able to deal with the kind of unexpected expenses that have a habit of cropping up when you least expect (or need) it.

4. So they don’t have to cut back

As well as potentially moving out of the home, if the finances are hit by the loss of a partner, it can mean the surviving partner has to cut back wherever there’s the opportunity.

Research shows that if a partner didn’t have life insurance, the surviving partner was more likely to take measures to make up for the loss of income.

Across the board, cost‐cutting measures included spending less on food shopping (36%), and even selling personal possessions (25%). It also led to some giving up their car, taking on loans or, for 21%, using credit cards.

While it may not prevent the need for any cutting back, a life insurance payout can go a long way towards maintaining the lifestyle the family had when the partner was alive, without having to resort to difficult sacrifices.

5. So your partner’s work-life balance is a choice

For some, losing their partner might mean they have to reassess hours worked, or change the type of job they have.

In the survey, most people who had a job were paid bereavement leave (79%), and most felt that the time off was enough. But more than two in five (43%) still felt they could have done with more time off immediately after their partner’s death. 

What about after that, though? Almost two in five people (36%) said their partner’s death had an effect on their employment. That could mean making up for the lost income by taking on more work beyond what they’d ideally do or changing jobs. But for some that might mean struggling to keep a job and their usual hours of work. Or needing to take on less while they go through the grieving process, or perhaps to make it easier to look after young children.

While in a minority, almost a fifth (17%) of people had to give up their jobs. with 15% needing to work fewer hours and 11% changing jobs so they could work more flexibly.

Whatever the reason, it’s easy to see how being more financially stable at an already difficult time might be avoided.