No-one likes to think about leaving their family behind when they die, but it can be comforting to know that the financial side of things will be taken care of, should the unexpected happen.
Unfortunately, research from Direct Line has shown that, for many families, things would not be so straightforward if one of the main income earners were to pass away suddenly. 40% of UK earners’ Life Insurance will pay out enough to repay the mortgage, but is not set up to cover the other household costs.
Of those who said they had no Life Insurance in place, half have a mortgage and/or children, who would be left in financial difficulty, in the event of their death. Adding to this worrying statistic, research from Mintel has shown that 55% of people have savings of less than £5,000.
Is Life Insurance necessary?
There are a few reasons given for not having Life Insurance, among the most commonly quoted, are:
- Assuming that the Life Insurance you got when you took out a mortgage is enough
- Believing that it is unnecessary to pay into a policy that you hope to never use
- Being unable to afford the payments
- Not having dependants
- Being ‘fit and healthy’
Unfortunately, none of these are good enough reasons to put off or avoid taking out Life Insurance.
If you have no dependants, think about other people who will struggle if you pass away. Who will be left to make arrangements for your estate? Will they need some additional support to get through what will already be a difficult time?
So, you’re fit and healthy and don’t expect to die any time soon. That’s great. Do you know what happens when healthy people, who look after themselves take out Life Insurance? They get lower premiums and find it much easier to get a great deal than people who are already ill, or in less-than-perfect shape.
It can be hard to commit to a policy when funds are already tight, but imagine how much tighter things would be if your family suddenly lost a portion of the household income. Life Insurance is actually much cheaper than many people believe it to be.
What type of Life Insurance should you get?
Life Insurance comes in all shapes and sizes, but the four main types are:
- Level-Term Assurance (LTA)
- Decreasing-Term Assurance (DTA)
- Family Income Benefit (FIB)
- Whole of Life (WoL)
LTA and DTA provide protection for a set period of time. LTA pays out a pre-agreed lump sum if you die within that timeframe, whilst DTA pays out an amount which lessens over time, often in line with a loan or mortgage balance.
FIB policies are designed to pay a set monthly sum each month if you die within the terms of the policy. This is a good way to avoid the financial difficulties which can come with losing a portion of the household’s income. These policies are also often cheaper and more accessible than DTA or LTA.
Whole of Life policies last until you die. Their guaranteed pay-out makes them more expensive than term-based policies, but the value of the peace of mind they bring often outweighs that, for those who need it.
For more information about Life Insurance, contact us on 0800 612 8099 or request a call back by clicking here.