The most important insurance you probably don't have

In the UK we’re not very good at talking about death and it’s something we don’t tend to think about or plan for. However, a parent of a child aged under 18 dies every 22 minutes in the UK, according to Child Bereavement UK.

If the worst happens and you or a loved one dies, having a life insurance policy in place can save your family a financial headache at an already emotional and stressful time. It can provide dependents with a lump sum that can cover the income of the person who has died or go towards something like a mortgage or children’s university fees.

What is it?

Life insurance can offer a lump sum of money to help you, or your loved ones, to re-adjust after someone dies. 

Most people put off arranging it, but if you or your partner died, how would the survivor pay the mortgage, household bills, car insurance, childcare costs and other outgoings? 

This is when life insurance kicks in ⁠— you don’t have the added stress and worry of how to keep on top of your regular bills while grieving. 

What's stopping you?

If you’re undecided over whether to buy life insurance or don’t know what kind of policy you might need or how much cover to buy, this guide will help you understand why it might be right for you.

You can't afford it

If you support others financially, think about how they would manage if you passed away. Could they continue paying for a mortgage or would they have to sell a family home and move? 

A life insurance policy can cover housing costs, among other bills, and it doesn't need to cost a fortune. The cost of a policy will depend on your own circumstances, such as your health and lifestyle, but it is generally cheaper the younger and healthier you are.

You're young and healthy

This is definitely the most ideal situation to be in, but freak accidents can happen to anyone, regardless of age and fitness.

Getting life insurance can offer you peace of mind against the unexpected happening. It’s also cheaper the younger you are. 

You don't have children

If you don’t have children there’s no point in buying life insurance, right? Wrong. If you have other dependents who rely on you financially - a partner, friend, or parent for example, they could be a beneficiary to your policy.

A life insurance policy can also cover mortgage payments if you have a mortgage with another person. It can also be a way of reducing your inheritance tax bill.  

You already have cover through your work

If you have what’s called death-in-service insurance, or similar, you will have a basic layer of life insurance. 

Most policies cover between three and five years of your annual salary and will pay this out to your named beneficiary or beneficiaries if you die while working for the company. This is a great work perk, but it might not be enough money to cover your income in the long term. If you need more cove - for instance, if you want enough money to pay your half of the mortgage, you can take out a separate policy for extra cash. 

You'll get around to doing it... eventually

Unlike other things you might put off, like going to the gym three times a week, or sticking to a diet, you only need to start a life insurance policy once.

You also won't need to review it each year either, unlike other types of insurance. However, if anything major changes in your life, such as if you become unwell and develop a new condition or if you stop smoking and change your lifestyle, this could push up or reduce the cost of your premium.

You already have a policy as the main earner

Well done, you’ve ticked off one piece of life admin and have sorted an insurance policy for your income. However, what would happen if your partner passed away - would your income cover all of the outgoing costs you need to make?

This includes often-hidden costs, such as childcare. For example, if your partner is the main childcare provider, and they died, could you afford to pay full-time fees if you have children who need to go to nursery? These costs can be around £1,500 a month which is not something to be overlooked. Having a lump sum come your way could offer you support when rearranging your life. You could consider a policy each, or a joint policy to cover you both. However, with a joint policy, there will only ever be one payout - when the first person in the couple dies. 

You don't know which type you need

There are different types of life insurance available, and you want a policy that suits you, and at an affordable cost that you’re comfortable with. You can get an overview of the different types of life insurance here.

Compare life insurance here