Why do you need life insurance?
Life insurance provides financial protection in the event of your death and gives your family and loved ones a lump sum of money to cover your income. This means they can stay in their home and pay for all the costs your salary contributed to.
Key takeaways
Life insurance can cover mortgage repayments, everyday expenses, and funeral costs
Anyone with dependants should consider buying life insurance to protect them in the event of an unexpected death
You can buy life insurance specifically to cover a remaining mortgage balance and there are policies which don’t require medical details too
Life insurance is valuable for individuals at all stages of life, not just the elderly or those with children, affordable options are available for people from age 18
What is life insurance?
Life insurance is protection that will provide money to your loved ones and dependants after you have passed away. The money can be used for anything they need to pay out for, such as:
Mortgage or rent
Household bills
Childcare or university fees
Funeral costs
Who needs life insurance?
Anyone who has financial dependants should think about having life insurance. Ask yourself if you were to die out of the blue, how would those you leave behind pay for their bills.
Would there be enough money to cover your share of the mortgage, for example, or would they struggle to meet the costs of everyday bills. If you have life insurance in place, this can be used to cover the money you usually take home.
It's particularly important for those who want to ensure that their family can continue to afford ongoing costs like mortgage payments, bills, childcare, and education expenses.
Types of life insurance policies
There are lots of different types of life insurance, including the following:
Types of life insurance
Level term life insurance
Level-term life insurance is where the amount of money paid out in death stay the same throughout the policy term. This means that beneficiaries receive a guaranteed payout upon the policyholder's death, which can be used for any costs at their discretion.
Decreasing term life insurance
For those focused on ensuring their mortgage is taken care of, decreasing-term life insurance is designed to pay out a lump sum that reduces over time, typically in line with the reduction of your mortgage debt.
Whole of life insurance
A whole of life policy, also called life assurance, offers lifetime coverage and guarantees a fixed payout to beneficiaries, providing peace of mind that your loved ones will be financially supported no matter when you pass away.
This is usually one of the most expensive policies to buy, as it providers cover throughout your life.
Joint life insurance
A joint life insurance policy is a practical solution for couples, paying out upon the first death and ending after the first claim, ensuring the surviving partner receives the support they need.
Over 50s life insurance
Over-50s life insurance is tailored for older individuals, offering guaranteed coverage without medical checks and covering most pre-existing conditions.
Key benefits of life insurance
Income replacement: Life insurance compensates for the lost salary of the deceased
Mortgage payoff: It ensures the mortgage is covered, so the family home is secure
Funeral costs: Many policies can cover funeral expenses before the lump sum payout
Debt clearance: Life insurance pays off the policyholder's debts, ensuring beneficiaries receive the remainder
Tax benefits: Having your policy 'written in trust' can protect the payout from inheritance tax
Additional benefits: Some policies offer extra perks like bereavement support or financial advice services
How much does life insurance cost?
You can get life insurance from just £21.78
When to consider life insurance?
Major life changes such as cohabitation, marriage, home buying, having children, or job transitions are key moments to consider life insurance. It's not just about providing for your family in the event of your death; it's about ensuring stability during life's unpredictable moments.
What happens if I don't have life insurance?
If you don't have life insurance and you pass away, your loved ones may face financial difficulties managing expenses like mortgage payments, bills, or childcare without the help of a lump sum from a policy.
However, if you have no financial dependents, you might not need life insurance. Some people may also have alternative coverage like a death in service benefit through their employer or income protection insurance.
Comparing life insurance quotes
When looking for life insurance, it's crucial to compare quotes and policies. Our life insurance cover calculator can help you determine how much cover you need and estimate the cost of your premiums.
Author
Rachel Ditchburn
Former Senior Commercial Manager
Rachel is a former Senior Commercial Manager at MoneySuperMarket, where she oversaw the Protection, Pet and Leisure Insurance channels. Outside of work, Rachel is a keen cook and enjoys live music,...
Reviewer
Rebecca Goodman
Personal Finance & Insurance Expert
Rebecca is an award-winning financial journalist with over a decade of experience writing for print and online media. Her mission is to take the jargon out of personal finance and to help everyone...
