Last updated: 14/06/2023 | Estimated Reading Time: 10 minutes
For people looking to buy life insurance, there may be some questions or concerns that come out of your research into how it can help with your financial commitments and the future of your loved ones. For example, what is the point of life insurance? And is a life insurance policy something that everyone has to take out?
But because no two situations or scenarios are ever the same, it’s important to understand whether you need life insurance or not, and if so, which one works best for your specific wants and requirements?
And while variables like finding the right policy and insurer are vital aspects of your search, it’s your dependents who are always going to be the focus of your life coverage.
While it’s true that not every person will need life insurance, there are a lot of other people who could find an ideal policy that gives their family more financial support in the future. But how are you going to know if life insurance is worth it? And how much cover do you need?
It’s all a matter of understanding what you’ll be getting with your life policy.
In This Guide:
- Am I Legally Required to get Life Insurance?
- Why Should I Take Out a Life Insurance Policy?
- Is Life Insurance a Good Idea for Everyone?
- What Happens if Someone Dies with no Life Cover?
- Which Life Insurance Coverage Should I Get?
- Finding the Right Insurance Company
- Asking Yourself What Truly Matters
Am I Legally Required to get Life Insurance?
You are under no legal obligation to take out a life coverage policy. People who look into the range of policies available to them do so because they need life insurance and feel that it provides them with the right protection for their assets and the well-being of their families.
While it’s not a legal requirement, exploring how you can cover any outstanding debts that your family could be left with in the event of your death or a terminal illness diagnosis is considered sensible by most policyholders. In other words, if you’re keen to financially protect your dependents after you pass away, it may be worth considering.
Why Should I Take Out a Life Insurance Policy?
For most people, taking out a life insurance policy is the best way to provide more financial support to family members in the future. If the unexpected occurs, and you die, could your family benefit from a life insurance payout? Would they struggle to keep paying household bills, or cover funeral costs?
Below are just a few of the scenarios where someone may want to consider taking out life insurance cover:
To help loved ones with mortgage payments
Repayment mortgages end up being someone else’s problem when you pass away, especially if there are still many years left on the repayment plan. Many people buy life insurance to plan ahead and help their families with these future financial issues.
Policies like decreasing term life insurance can provide some extra support to people with repayment mortgages or other debts in need of being paid. With this kind of coverage, your payout decreases over time, much like the decreased debts being paid off.
Level-term life insurance cover is also a potential policy for anyone with an interest-only mortgage plan. This type of life cover has fixed payout amounts for a pre-agreed amount of time. For your family and other dependents, this means that a payout would be the exact same, no matter when you pass away, as long as it was within the policy terms.
To cover two people after a marriage or business partnership
A marriage is always a cause for celebration, but it may also mean having to combine family finances, assets, and other variables too. And when it comes to forming a strong and loving partnership, knowing each of you will be covered in the event of the other’s death can show true commitment and dedication.
The same goes for business partnerships, and pretty much any other joint venture or relationship you can think of. For these reasons and more, a joint policy offers many benefits, including how to cover joint debts if the unexpected should happen.
To provide a better future for your children
It’s in every parent’s DNA to worry about their kids, especially in the event of a parent dying, or a terminal illness diagnosis. And with future considerations like higher education costs or other goals dependent on being financially secure to think about, a life insurance parents policy can help you worry less and enjoy the time you have left with them.
If you need life insurance for any of the above reasons, you may want to explore the term life insurance options available. Both level term life coverage and increasing term protection are designed to pay out a lump sum if you pass away during the policy terms.
Is Life Insurance a Good Idea for Everyone?
Again, not everyone will need life insurance. And while those who are in need of it should act sooner rather than later, you might not require life cover if one of the two following scenarios apply to you:
- Single people with no children or financial dependents
- People whose employers may already cover them
Even in the above circumstances, it’s always worth double-checking what life cover can offer to you and your loved ones. If you’re still unsure about these insurance policies and whether you’d benefit from them, ask yourself the following questions.
- Do you have people who are financially dependent on you?
- Are you the main money earner in your family?
- Could a critical illness diagnosis cause financial harm to your family?
Doing this helps to keep your priorities in order when exploring options, meaning you’ll make the best possible decision for yourself and the people you care about.
What Happens if Someone Dies with no Life Cover?
Only you can truly decide whether life cover would benefit you. For people who feel like they need life insurance, putting off looking further into your options can result in the following potential issues.
- Financial problems paying rent or mortgages for loved ones or dependents
- Your dependents potentially taking out loans due to a lack of a payout
- Increased childcare costs for your partner to deal with if you die
- Money obstacles for children pursuing higher education opportunities
Which Life Insurance Coverage Should I Get?
Finding the best life insurance policy for your needs means looking through the range of options available that match your situation. Broadly speaking, you can expect to need life insurance via one of the following categories.
Decreasing Term Life Insurance
Decreasing term protection is intended to help your dependents pay off anything that could impact them financially if you were to die (as mentioned above as an option to assist with mortgages). For this reason, this type of coverage is also known as mortgage life insurance.
The length of this policy can be identical to the time remaining on a mortgage, or other large regular payments that the policyholder is responsible for.
Level-Term Life Insurance
Level-term policies pay out a specified amount to your beneficiaries as long as you pass away within the terms of the policy. This cover is designed to pay out this amount no matter how far into the terms you pass away, whether it’s the first year of the coverage or the twenty-fifth.
Family Income Benefit
Insurance policies like family income benefit pay dependents a regular tax-free amount, instead of a single lump sum payout. As the amount paid is spread out over a set period of time, it can be far easier for your loved ones to manage.
For example, should you decide that your dependents need £1,750 per month for the next 10 years, and you pass away after 2 years, they’d receive a monthly payment of £1,750 for the remaining 8 years.
Joint Life Insurance
While we’ve gone into some of the scenarios when you may consider taking out a joint life policy above, it’s also important to know that the surviving partner/surviving policyholder will no longer be covered by this life insurance policy when you pass away.
In fact, once they’ve had money paid to them, they’ll need to open a brand new policy if they wish to remain covered in any way.
Over 50s Life Insurance Policies
Life insurance for over 50's helps your loved ones pay for difficult things like funeral expenses, and as a whole-of-life insurance policy, benefactors can expect to receive a payout once the policyholder dies. Most of these kinds of life cover have a guaranteed acceptance rule without policyholders having to take a medical examination.
For this reason, anyone with a pre-existing health condition or problematic medical history may choose to get this coverage. However, policyholders can generally expect to also pay higher monthly premiums than other options.
Please Note: Not all insurance providers we work with offer all types of policies. Please do your research and compare quotes before proceeding.
Finding the Right Insurance Company
Life insurance isn’t just about considering what’s best for your loved ones. It’s also about conducting some thorough research and finding the right life insurance provider to trust with your policy matters.
To ensure that you’re covered should you die or become critically ill, here are some of the best ways to find your ideal life insurance provider.
It’s always best to start with discussing your life insurance matters with trusted friends, family, and work colleagues. They may have a provider they feel is perfect for your needs.
However, avoid being sucked into only discussing the coverage and monthly payments they make, and be sure you’re asking the questions that matter most to you. Can you add critical illness cover? Do they offer flexible payment plans? Does their critical illness cover include all ailments or a select few?
After narrowing down your options based on knowing which providers have what you’re looking for, it’s time to delve into the online reviews for that life insurance company.
Be sure to look at both good and bad reviews (if there are any), as well as a few middle-of-the-road reviews. Hopefully, you’ll find some fair reviews that include people mentioning polite service, easy processes, and money paid in the event of death.
Whether you need term life insurance policies, whole-of-life protection, or just some critical illness cover, you’ll have to be sure that the insurer you choose is fully qualified and accredited. Generally speaking, if their website doesn’t have their accreditations clearly shown on their web pages, it’s best to tread carefully.
Asking Yourself What Truly Matters
Ultimately, only you can decide how much life insurance you need and if a life insurance policy is worth it for you and your beneficiaries. But in many ways, life insurance pays back to you in more ways than one.
A life policy should provide you with peace of mind, security, and confidence in the future for the people who matter most to you. And with the life insurance payout that they’ll get from the right policy for their needs, you’ll have set them up for fewer worries and financial burdens in the years to come.