Are Life Insurance Coverage Necessary for Me?

We’ve been getting a lot of inquiries lately about Life Insurance, and one of the most frequently asked is, “Do I need Life Insurance?” as well as the age-old question, “Is Life Insurance Worth It?”

There are many different kinds of Life Insurance, but the level of protection and the policy type you select are mostly determined by why you require it. Taking out a Life Insurance policy only for the purpose of increasing one’s financial security should never be done. To put it plainly: Standard Life Insurance does nothing more than strive to protect you and your loved ones from financial ruin in the event of an accident or illness.

Sadly, one in every 29 children will lose a parent before they are old enough to care for themselves. This, of course, is a devastating experience for any family, but it also has financial repercussions. Having a parent who works and earns a living means nothing if that parent is no longer there. In the event that a child’s other parent dies while they are in their care, the cost of childcare may rise or the family’s income would be affected.

Buying life insurance is purely for the benefit of your loved ones. Your £20 a month won’t buy you a new television. In the worst-case scenario, you may rest easy knowing that you’ve safeguarded the individuals who mean most to you. That way, even if anything horrible happens, your loved ones won’t have to stress about how they’re going to pay their bills or feed themselves.

Types of Life Insurance Cover

For the most part, there are three primary categories for purchasing Life Insurance, each with a specific purpose.

Level Term Life Insurance

Simply select the amount of money you want to be insured for and the length of time you want it for. For those who pass away while their policy is still active, their beneficiaries will receive their benefits.

Mortgage Decreasing Protection

Your loved ones won’t have to pay the mortgage if you die, thanks to this insurance policy.

Whole of Life Insurance

As the most cost-effective type of Life Insurance in the United Kingdom, Level Term is also the most popular. One issue we frequently get asked about Level Term Life Insurance is “so if I take £200,000 out over 25 years and I’m still living, has my money been wasted?”

What’s in It for Me?

Life insurance is an act of selflessness. Buying it is also a way of hoping you never have to use it, that it’s just money for nothing. A true investment would cost several times as much as this one does because the intent was never to make you £200,000. In 25 years, if you are 40 years old and your eldest child is 5, you will be 65 years old and your eldest child will be 30 years old.

When you’re 40 years old and have young children, you’re more likely to buy Life Insurance than when you’re 65 and don’t have any dependents. As a result, the type of insurance policy and the quantity of coverage you require will almost certainly be different.

Life insurance is designed to cover the loss of income if you die. In other words, if you don’t have a life partner or dependent children, you generally don’t need life insurance at this time.

If you have a spouse or children, you should think about the financial implications of your death.

With a lump sum, you’d be seeking to pay off any outstanding debts (including your mortgage, if you don’t already have one), as well as provide for the future outgoings of your dependents.

Term Time

The term time has less of an impact on the cost of the policy than the sum assured, but generally the longer the term the more the cover costs. Some people still fall into the trap of thinking they should maximise the chances of the policy paying out and looking for a 40 or 50 year term. This pushes the cost right up, and for many people means you are paying a lot more money now, to protect your children when they are in their 40s or 50s and you have long since retired.

Instead, consider at what age your children will no longer be financially dependent upon you, possibly after full time education will have finished for example. Doing this will keep the cost down and ensure your policy protects what it needs to. You can always look at a funeral expenses or funeral plan policy when the term policy finishes.

Again, with Term Life Insurance, your major hope should be that you will never have to use it because that means you will have had the opportunity to watch your children grow up. Sadly, not all parents are afforded this opportunity.

If you have a spouse or children, you should think about the financial implications of your death.

With a lump sum, you’d be seeking to pay off any outstanding debts (including your mortgage, if you don’t already have one), as well as provide for the future outgoings of your dependents.

Paying more for health insurance is not uncommon for those with pre-existing medical conditions, a high body mass index (BMI), or who smoke. Life insurance may be less expensive if you’ve been nicotine-free for a long time, including the use of e-cigarettes and patches. For those who were overweight or had a chronic health condition that was out of control a few years ago, the same rules apply.

Will It Pay Out?

The simplicity of Life Insurance is one of its greatest virtues. Insurers aren’t going to get into a fight with you like they may with other policies. Is your 70-inch flat-screen TV missing or is it just sitting in your attic? The fact that you’re dead won’t be questioned if you are. There are only two exceptions to this rule: suicide within the first year of the policy’s inception, and not answering all of the policy’s questions honestly. Life insurance companies often report claim acceptance percentages of between 98% and 99%.

So, if you have family members or friends who are financially or medically dependent on you, it’s generally a good idea to get life insurance. For the vast majority of people, it’s a lot less expensive than expected. It’s a quick and easy approach to protect your loved ones, so you can get back to living your life.

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