Be sure to insure



life-insurance.jpg

One of the most important things you will ever buy is life insurance, and if you have a family, it’s a necessity. Yet according to this survey a fifth of people no longer have life insurance policies.

So what is it that’s preventing people from buying life insurance, the cost, or is it simply a case of unanswered questions they have?

We thought we would take a look at some of the common reasons people give for not having life insurance:

Life insurance is too expensive

As you get older it will cost you more, but life insurance is not as expensive as you may think. The rates will vary depending on the type of life insurance policy you take out but as there are lots of different providers you can certainly shop around for a policy that is affordable for you.

I don’t know how much life cover I will need

Everyone’s needs will be different and the only way you can work out how much life insurance you will need is to understand the needs of your beneficiaries. You should consider any debts you have outstanding such as a mortgage or loans, and also things such as childcare, school fees and higher education costs.

The easiest way to do this is to work out how much money each of your dependents need each year and for how long. For example:

Child 1 £6000 for 10 years = £60000
Child 2 £6000 for 8 years = £48000
Partner £20000 for 10 years =£200000
Total £308000

I don’t understand the different types of life insurance

Term insurance cover-You choose how much you want to be insured for and for how long. If you die within this term the policy will pay out to your beneficiaries. However, if you don’t die within the policy term the cover simply comes to an end and the premiums you have paid are not paid back.

Whole of life-This type of policy guarantees to pay your dependents irrespective of when you die. It is usually more expensive than term insurance because a claim will always be made.

Some whole of life plans charge a fixed cost for a fixed amount of cover so you know exactly what you will be paying and how much you are covered for from the start. There are also plans which charge fixed premiums up to a specified age, after you reach that age the cover continues but you no longer have to pay.

Decreasing-term life insurance policiesAs the name suggests, with this type of policy the amount you are insured for reduces as time goes on These policies are quite often used to cover debts that reduce over time such as a repayment mortgage.

I don’t need life insurance

Ok, so those who are young with no dependents or those whose kids are grown up and have no mortgage left to pay might not need life insurance, but what about these people:

The main breadwinner-Life insurance can replace your income if you die and enable your family to pay everyday expenses.

Stay at home parent-Life insurance would provide the money to pay for things the stay at home parent would have done such as child care.

Mortgage payers-Life insurance could pay off your mortgage and enable your family to stay in the home.

Individuals of high net worth-Life insurance could provide a beneficiary with the money to pay inheritance or estate taxes.

The most important function of life insurance is to replace the income of the deceased and enable their family to continue living comfortably. But you should always remember that life insurance will contain exclusions, limitations and terms which is why we recommend speaking to a financial professional for advice before going ahead.