A simples guide

Is life insurance worth it?

Talking about life insurance is one of those things that can get you banned from dinner parties. It’s not fun, it’s not glamorous and who in their right mind wants to discuss what happens if they pop their clogs.   But like most topics that don’t make the grade in polite conversation, it’s a pretty important subject and one that you should at the very least consider.

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Why is life insurance important?

Life insurance provides your beneficiaries with a lump sum payment in the event of your death. It could give you peace of mind that some of the financial burden your family may face without your salary coming in will be taken care of. The amount of money paid out will be dependent on the level of cover you choose (which in turn helps determine the price of your policy).

Does everyone need to have life insurance?

Not necessarily, it depends on your circumstances. If you have dependents then it should be something you consider carefully. Making sure they are taken care of should the worst happen to you could be very important to you especially if you are the main bread winner. But don’t presume that it’s only breadwinners that need to consider life insurance, it’s worth think about whatever your situation:

  • Two income families – don’t think that just because your spouse or partner works too, then there’s no need for insurance. Think about whether your financial contribution would be missed, is one salary enough to cover all the household outgoings? What would happen if they need to cover the cost of additional childcare?
  • Stay at home parent – one thing many stay at home parents do is underestimate their financial worth. If you weren’t around, then how much would it cost to cover childcare and household chores? How would your partner manage these If you weren’t around?
  • Carers – if you care for other relatives and you weren’t around how much would your care be missed – not just emotionally but financially too?

Even if you already have cover such as life insurance included in your employment package or if you’ve got an existing policy – check it’s enough to cover everything that your loved ones might need. A policy taken out years ago might not stand up to the responsibilities you have now. You may have become a parent since then, moved to a bigger house with a larger mortgage or just got married – life’s always changing and a good policy should reflect your needs as they are right now. However, eternal singletons with no dependents may not need to have life insurance at the top their priority list.

When should I take out life insurance?

Like good cheese or fine wine, growing old is about maturing for the better. But, like many vintage things, it comes at a price. It’s the same with life insurance, the more mature you get, the more you may pay for your policy . Which is why it might worth investing in life insurance when you’re younger, fitter and generally healthy. You might be surprised to know that a policy including critical illness cover can start from as little as just £2.35** a month.

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Types of life insurance

There are two main types of life insurance. Term life policies run for a fixed time period such as five, ten or 25 years. With these policies, if you outlive the policy period then you won’t receive a pay-out. The alternative is a whole of life policy – these are usually more expensive as they pay out whenever you pass away (so long as you keep up to date with your payments of course). You may need to speak to a financial advisor to get this type of policy.

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But can I get by without insurance, what’s the alternative?

Of course you can decide to self-insure and put money aside each month rather than invest in a policy. Sadly, though, death is one of those things that happens one day and not even the most conscientious note taker, list maker or organiser can plan for it. So how do you know that your self-insurance pot will have accrued enough funds to cover any necessary expenses when the time does come? Plus, there’s always that temptation to spend it on that once in a lifetime holiday – life’s for living after all, right?

Be prepared, start comparing

Life insurance isn’t about valuing your worth. It’s about giving you and your family peace of mind so that you can all enjoy life right now and know that the future’s taken care of so be prepared and start your life cover today

**Prices start from figure based on a 30 year old non-smoker with decreasing term cover over 10 years (Mar 2015-Feb 2016)

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