There are several factors to take into account when considering taking out a life insurance policy, and most factors will depend on the individual’s circumstances.

If the individual is a single person, with no dependents, then the thought of life insurance will not be a primary consideration.

However, an individual with one or more persons close to him or her, who rely financially upon the individual, life insurance will be a beneficial safeguard and option to think about having.

There is only one question to ask yourself about having life insurance:

“Would my loved ones cope financially without my salary?”

If the answer is no, it is very likely that life insurance is a critical thing to have.

Another common question people ask when talking about life insurance is:

Why do I need life insurance?

While you are around and able to provide essential financial stability for your loved ones, life is good. However,  if the worst were to happen, and you were no longer around your loved ones lose this security.

Everyday essentials to maintain their current lifestyle will be lost, and the following things may be difficult for them to sustain:

• Mortgage repayments
• Everyday family living costs such as bills and existing debts
• Childcare costs
• Your funeral costs
• Savings for future child university fees

It makes sense, therefore to consider a life insurance policy that will pay out to cover all the above, from as little as £10 per month.

What about if I am single? Do I still need life insurance?

You might think that life insurance is not a factor to consider if you are single. It may be prudent to review the costs of your funeral, even when you are a single person. Funeral costs are alarmingly high now, more than people realise, and rising every year. Expect someone to pay between £3000 and £5000, (Source: SunLife Cost of Dying report 2017).

That someone may be family members such as your parents or siblings. You may consider this cost to be a financial burden, especially if they will find it hard to source the necessary funds to cover your funeral.  This fact is even more pertinent in the event of an unexpected death.

A life insurance policy may be of benefit for you even if it only has the funeral costs element to it.

Another aspect to consider is that of youth.  Even if you are single, you may have a plan to one day meet someone and start a family. The younger you are taking out a life insurance policy, the better it will be as premiums are low for young people.

Future-proofing your future with a life insurance policy will benefit loved ones of the future and cost you less in the long term.

Do I still need life insurance even if I don’t have children?

If you live alone and enjoy a carefree lifestyle that involves no other person, generally you would not require full life insurance.  Perhaps other than that to cover funeral expenses as previously mentioned.

When thinking about life insurance, the term dependant is one frequently used. However, a dependant is not always about children; it can refer to wife, husband, partner or any family member — basically, anyone who depends and relies upon your salary or income.  Even if your partner etc. is working themselves, your income may make up the difference required to meet all the financial obligations of the household. Therefore, the term “dependant” depicts that someone for whom you love and care.  A dependant is someone whom you would want to ensure can continue to live the lifestyle you help to support financially.

What type of life insurance will I need?

There are different features of life insurance, and depends mainly on what you require, here are some simple explanations:

Whole-of-life cover

A whole-of-life policy is a guarantee of a payout and lasts for your lifetime. The drawback of this policy is that it is more expensive due to its nature.

Term insurance

Also referred to as term life insurance, with a payout within a specific period.  This type of policy is popular as monthly premiums are usually cheaper and can be tailored for a fixed period such as the duration of a mortgage, or for when children are in university.

Decreasing-term insurance

Also called mortgage life insurance due to the nature of payout decreasing each year in line with the mortgage. By the time the mortgage term is complete, there will be no payout. Again, a prevalent option for many as the premiums are much cheaper.

Increasing-term insurance

As the name suggests, increasing term insurance is a policy where the sum assured increases every year by a fixed amount.  Typically designed to keep inflation in mind, especially for very long-term plans. For example, a payout that seems high in today’s market may diminish due to inflation over the term of the policy.

An increasing-term life insurance policy provides peace of mind, especially for those with sizeable assets, and risk of costly inheritance tax. Increasing-term life insurance may help to cover these types of costs.

Renewable term insurance

As the name suggests, renewable term life insurance has the benefit of renewing and extending cover when the policy expires. The advantage being recent health issues will not feature as part of the renewal process hence no requirements for a medical.  However, premiums may be higher due to increased age.

Joint life insurance

Joint life insurance is one policy for two people and offers cheaper monthly premiums. It is essential to bear in mind that when one person dies, the policy terminates ultimately.  It will be necessary for the surviving person to take out a new policy if there are more dependants to take into future consideration.

Another life insurance policy to consider is:

Over 50 life insurance

Over 50s life insurance is a popular option for people in their 50s to consider. Although the payout is generally lower, the sum is considerable and financial help towards funeral costs or a lovely gift to leave for loved ones.

Do I still need life insurance even if I don’t have a mortgage?

A mortgage is often considered one of the main reasons for taking out life insurance.  However, there may be other good reasons to consider life insurance, especially if you have loved ones. For example, your loved ones may use the funds to

• Help to cover your funeral costs
• Clear any debts you may have
• Deliver an inheritance
• Contribute towards a family event such as a wedding or a holiday
• Contribute towards a much-loved charity

Conclusion

If the worst-case scenario were to happen to you, the financial impact on your loved ones would undoubtedly be challenging. With so many life insurance options on offer, providing financial protection and a guarantee of financial peace of mind, it is crucial to focus on guaranteeing their security.

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