It gives your family a safety net
When you have a family, your income supports others as well as yourself. Your family might be left struggling in the event of your untimely death. It may seem a bit morbid to think about income replacement but if you buy life insurance you can give your surviving partner and children a death benefit to pay living costs, and outstanding debts or to give them some financial security.
You could decide to take out a single life insurance policy or a joint policy that covers you and your partner. A joint life policy is cheaper than two single policies but most will only pay out once.
There are different types of life insurance policies. A level-term policy pays out a lump sum that can be used to pay bills. Alternatively, you could leave some money for your children, to help pay for university or their first home. Decreasing term life insurance pays out less as the years pass so is the ideal choice to pay off your mortgage, which will also reduce over time.
You’re buying your first home
When you're buying your first home most lenders will insist that you have life insurance in place. If you choose a decreasing life insurance plan you can tailor your coverage so you're covered for your full mortgage term. The amount that the policy pays drops each year so if you keep up with the monthly payments on a repayment mortgage your payout should cover the full amount.
This gives your family financial peace of mind as they won't have to worry about the mortgage repayments when you're gone.
Alternatively, if you have an interest-only mortgage you may be better off with level term or whole life insurance as the capital sum won't reduce.
You have debts
If you’ve taken out any loans, to buy a car, for example, you might be able to make repayments but your family will need to pay off any outstanding debt if you die before it's repaid. Your life insurance can allow your loved ones to settle your debt without needing to take the money out of your estate.
Some loans, for example, student loans, can be cancelled, so it's important to check the terms and conditions when trying to figure out how much life insurance you might need.
Paying death-related expenses
Death and taxes are both inevitable and can be expensive.
If you have assets which exceed the tax-free allowance for inheritance tax, your beneficiaries will need to pay tax on their inheritance when you’re gone. If you’d rather not leave them with a hefty bill, your life insurance can have it covered. We'd recommend that you speak with independent financial advisers for estate planning advice.
Perhaps inheritance tax isn't a concern, but you would like to leave some money behind to help cover your funeral costs. The British Seniors Funeral Report 2021 found that the average UK funeral cost £5,631. Most people would struggle to find that kind of money but still want to give their loved ones a proper send-off. Your life insurance policy can give you enough coverage to ensure those final expenses are paid.
How we can help
If you need life insurance but aren't sure where to start our life insurance brokers can help. We'll provide you with an outline of the products on the market and a comparison quote to give you the right cover and financial protection for your circumstances.
Frequently asked questions
How does life insurance work?
Life insurance gives financial support to your loved ones when you're no longer around. The cover you need depends on your circumstances; you might want to use it to replace income or settle any outstanding financial obligations.
Your insurance provider will consider factors such as your age, sex and whether you have a high-risk job. They may ask that you have a medical exam. Once you're happy with your quote you simply start by paying the monthly premiums.
Do fixed-term policies have a cash surrender value?
Fixed term cover only pays out if the insured dies during the term of the policy. It doesn't have any cash value so if you haven't claimed when the policy expires you'll simply stop paying the premiums and the cover will end.
I have life cover through my employer. Do I need my own life insurance policy?
This depends on how much insurance you need. Business life insurance, where your employer pays the premiums, provides death in service benefits so you can nominate beneficiaries to receive a cash sum when you die. It may also give you access to other services. You can also buy insurance separately to protect your children's future or to contribute to your family's financial goals you can do that.
Do I need any other insurance?
Life insurance can pay your debts and other expenses if you die. However, you may also need to protect your loved ones and make financial contributions to your household if you become critically ill and are unable to work. Your insurance company can also provide critical illness cover to make sure that your living expenses are paid while you're away from work.