Not everyone needs life insurance (also known as life cover and death cover). But if your children, partner or other relatives depend on your income to cover the mortgage, any other unsecured finance or other living expenses, then the answer is yes – you probably do want life insurance, since it will help provide for your family in the event of your death.
Life insurance can pay your dependants money as a lump sum or as regular payments if you die.
It’s designed to provide you with the reassurance that your dependants will be looked after if you’re no longer there to provide.
The amount of money paid out depends on the level of cover you buy. You decide how it is paid out and whether it will cover specific payments, such as a mortgage.
Term life insurance policies: run for a fixed period of time (known as the ‘term’ of your policy) – such as 5, 10 or 25 years.
These kinds of policies only pay out if you die during the policy. There’s no lump sum payable at the end of the policy term.
Life insurance usually only covers death – if you can’t provide for your family because of illness or disability, you won’t be covered.
Some life insurance policies provide a terminal benefit, although these are not automatically granted. A terminal benefit will pay out on diagnosis of a terminal illness. Check the terms and conditions of your policy to see if you’re covered.
Most policies have some exclusions (things they don’t cover). For example, they might not pay out if you die due to drug or alcohol abuse, and you normally have to pay extra to be covered when you take part in risky sports. If you have a serious health problem when you take out the policy, your insurance might exclude any cause of death related to that illness.
You can’t rely on the government to take care of your family – the money they would get from the state is much lower than you’d probably expect. If you want to provide for your family financially if you die, think about getting life insurance.
Did You Know?
More than 25% of men in the UK will die before their state retirement age and sadly, 34 in 1000 men will die by their 40th birthday. For women the numbers are a bit better - 16% of women in the UK will die before their state retirement age however, 19 in 1000 women will die by their 40th birthday.
Data taken from the ONS
One of the most important aspects of financial planning is making sure you protect what you've got
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