Three reasons why you need life insurance

Life insurance is an essential financial product that could make a real difference to your loved ones if they lost you.

You need cover now if…

Here are three reasons to ensure you have adequate life insurance cover.

1. You have a joint mortgage
If you own a property, your mortgage lender probably explained the need for you to have some form of protection insurance in place when you first took out your loan.

Banks and building societies generally require borrowers to have this cover so that, if you die, your mortgage will still be repaid in full.

If you own a home jointly (with a partner, friend or family member) it’s crucial to ensure they are protected, too. You should ensure you have enough life insurance in place to cover your share of the mortgage in case you pass away.

If you don’t, your spouse or housemate could end up being pursued for your entire joint mortgage debt in the event something happens to you.

2. You have financial dependents
If other members of your family are dependent on you financially, it’s important to consider how they’d cope if they lost you.

How big a hole would your salary leave in the household budget if it suddenly stopped coming in?

Ensure your life insurance will pay out a lump sum large enough to keep your dependents afloat in case you’re no longer around.

Likewise, if you’re a stay-at-home parent, think how much it would cost to pay someone for all the work you do, and consider insuring your life accordingly.

Research from Legal & General shows it could cost as much as £32,000 a year to replace the work of a full-time Mum!

3. You have other, non-mortgage debts
If you have outstanding balances on credit cards and personal loans, it’s important to make sure they’ll be paid off in the event of your death.

If you don’t have life insurance, debts like these will need to be repaid out of your estate when you die – and your family will have to deal with your creditors after you’ve gone.

Why you should think twice about cancelling your cover…

Since the start of the recession, many of us have had to make financial sacrifices. Sadly, some have considered cancelling important insurance policies in order to save money.

Here are three reasons why getting rid of your life insurance could be a costly mistake.

1. While you have no life insurance, your family has no protection
Cancelling your life insurance policy means that, until you take out a new one, your loved ones are left financially exposed.

Even if you think the likelihood of something happening to you is low, you must have taken out your existing life cover for good reason.

Unless your circumstances have changed significantly since then, it is likely your family still needs protection.

2. Cover may cost more when you are older
The price of life insurance premiums is based on the risk your insurer will have to pay out, so cover is likely to become more costly as you get older.

If you cancel your life insurance policy now and try to buy a new one in a few years’ time, you might find you have to pay more for the same level of protection you originally had in place.

3. If you’re unlucky, you could end up ‘uninsurable’
It’s important to recognise the possibility that if you cancel your life cover now and your health deteriorates, you may find yourself refused insurance later.

If you were to become terminally ill, for example, you might find it impossible to replace the life cover you previously cancelled.

Seek advice
If you need a more affordable life insurance policy it’s a good idea to seek advice and compare a range of options, rather than cancel your cover outright.

Hopefully, this will help you save money without giving up your peace of mind.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**