Life insurance: is it worth it?
Have you ever thought of putting yourself up for sale? Do you ever wonder how much money you’re worth?
We'll do anything to protect the ones we love right? Many of us tend to overlook one of the most important and relatively easy ways to protect our families - life insurance.
There is no right or wrong amount of life insurance as any cover is better than none at all. If possible, you should ensure that you are able to provide a large enough sum of money to remove the burden of current debts and if possible, provide enough for your dependents to maintain their current lifestyle.
Choosing the right type of cover comes down to understanding the risk you are trying to insure. Life insurance, unlike many other types of insurance can be setup with a longer term so it’s important to ensure that a policy is able to meet your needs today and in the future.
There are a number of things to consider when you decide to take out life insurance. First off, you need to decide what you want the policy to protect. For example, if you want to cover existing debts such as your mortgage then taking out a policy for your total debt should be sufficient. However, if you want to ensure that your family is protected there are a number of things to consider.
- How much would your family income drop?
- What are the family expenses and how much would they change?
- How far will your savings go?
- How much cover do you receive from your employer or company pension?
- Are there any state benefits that provide extra support for your family's needs?
There are a number of factors that may cloud our judgment and prevent us from considering a policy but understanding these misconceptions can help steer our decisions in the right direction.
Are you the main wage earner?
Without your income, your partner might struggle to meet day-to-day living costs should something happen unexpectedly. On top of that, your loved ones could be saddled with huge unmanageable debts. Further, a payout from life insurance could help provide for your children’s future.
Stay-at-home parents
If you are a full-time parent who does not work, it would be a mistake to assume you don’t make a financial contribution to your family. Who would act as child care provider, chef and chauffeur if you were to pass unexpectedly? It is extremely unlikely your family would find someone else to provide these services free of charge.
AXA Insurance places the value of these services at £23,000 per year.
Life changes
Even if you have life insurance, it’s important to revaluate your level of cover if you undergo a major life change. For example you may need to take additional protection if you take out a joint policy with your spouse and then get divorced.
A new job or even a promotion could also be justification to re-examine your policy.
Do you have debts?
If you have debts and few assets, taking out life insurance could be one of the most effective ways to safeguard your family’s security after you’re gone. Remember, your creditors will be paid from your estate after your death. If your debts are significant this could eat a large chunk of your family’s inheritance.
Do you have a low wage?
Life insurance can be very affordable. For example, if you are a healthy and under 30, you can secure a policy from just £5 per month. However, if you are young and healthy, the one place your mind won't stray is towards death. The issue here is that this is the best time for you to buy life cover as you will never see rates that low when you age.
Likewise, securing coverage for some adults over 30 can be as low £1.15 per week.
Single with no dependents?
Just because you don't have any dependents does not mean that you do not need cover. It is wise to get a policy that will at least cover the cost of funeral expenses, medical bills and your debts to ensure that your family is not burdened by these expenses if something were to happen to you.
**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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