Is your life worth insuring?
If you’re not particularly wealthy, it’s easy to underestimate the financial contribution you make to your family.
Although you may not think you need life insurance you might want to consider buying a policy if you fall into any of the following categories.
Are you the main wage earner?
Could your partner meet day-to-day living costs after your death or provide for your children’s future without your income? If you don’t have a life insurance policy, your family could be saddled with massive debts they could not afford to pay.
If you have a joint mortgage, your other half may not be able to afford the repayments on your home without your earnings.
Further, a payout from your insurance policy could help your dependents maintain their standard of living after you pass away.
Are you a stay-at-home parent?
If you are the main childcare provider, your death could devastate your family – both emotionally and financially. Your other half may need to find the money to pay for expensive childcare and other domestic costs.
Many stay at home parents prepare meals, do laundry, act as a chauffeur (the list is endless). Should you pass away, your family is unlikely to find someone else who would provide these services free of charge.
In fact, AXA insurance puts the value of a stay-at-home parent at £23,000 per year.
Has your life changed?
Whenever you undergo a major life event such as having a child or getting married (even divorced), it’s a good idea to reassess your financial affairs.
For example, you may need to replace a joint life policy you had with a former partner if you end the relationship.
Even getting a promotion could necessitate a review of your life insurance. If you are suddenly earning more, it might be worth increasing your cover to reflect the change in your financial situation. Otherwise your family could be forced to revert to a more frugal way of life without your income.
Do you have debts?
If you have a number of creditors and few assets, a life insurance policy could spare your family from financial hardship after your death.
Even if you do have assets to bequeath, the value of your debts will be deducted from your estate. If a large chunk of your estate goes toward covering your debts your family may be left with very little.
A lump sum from your life insurance policy could help pay your creditors and make sure your family reaps as much benefit as possible from any assets you may have.
Top tips for buying life insurance
- By setting up your policy in a trust you could avoid paying inheritance tax – which could be as high as 40 per cent.
- Remember to investigate any death in service benefits offered by your employer.
- If you are a smoker or overweight, banishing those bad habits could help you cut the cost of your premiums and even live longer.
- Because the life insurance market is extremely competitive, it is a good idea to speak to an independent financial adviser to make sure you get the lowest possible premiums.
**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.**
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