It’s not a pleasant statistic, but the reality is that one in twenty children will lose a parent before they’ve finished full-time education. While it will also be an emotional loss, without that source of income it can often be very difficult to pursue further study, or the family may run into further financial difficulty due to outstanding debt. Having a life insurance policy is the cheapest way to protect your family if the worst happens. This quick guide will help you understand who needs life insurance, how much cover you’ll need and how to pick a policy.
Is it worth having?
The big question to ask yourself is, “Would my dependents be able to cope if I died?” If you’re single and you have no dependents, then it’s probably better to look after your own finances than consider life insurance. However, if you do have dependents and they would find themselves in difficulty in the event of your death, for paying the bills, schooling and the like, then it’s worth getting a policy.
Assurance/insurance - what’s the difference?
- Life assurance covers you for the inevitable event of your death - it’s for something that is certain to happen.
- Life insurance covers you for where there is only a risk of it happening - there’s no guarantee you will die within the term, but you will be covered for it.
How much cover is necessary?
How much cover you need and the cost depend on your circumstances and these will be quite wide-ranging! If you’re going to compare companies, then it’s worth doing it all at the same time on a price comparison website. Legal & General are also worth a look for life insurance.
In basic terms, the following factors should be considered:
- The higher the payout, the higher the premium. This should certainly cover outstanding debts, while also providing your dependents with a reasonable standard of living. Check your work place to see if it offers a death in service benefit. If it does, this should be deducted from the total.
- The shorter the term, the cheaper. In the likely event of providing cover for your children, you should take out a policy that will last until they finish full-time education. There’s no obligation to have a policy for a rounded number of years - if you only need cover for 13 years, then that’s how much cover you should take out!
- The less risk of death, the cheaper. If you’re over 65, smoke and have a history of illness, then your policy will become much more expensive than that of a healthy non-smoking 40 year-old. Just ensure you disclose all information about your health, or you could find your policy voided should you fall ill.
Picking a policy
With regard to life insurance, there can be no debate about whether someone is dead or not, so it is simply a case of the cheaper, the better. Just make sure the company you take a policy from is reputable while the premiums are fixed and not renewable.