Life insurance isn’t like auto insurance—you don’t have to have it. It’s more of a personal choice, and some people decide they don’t need it. However, in many cases, especially if you have a family or financial commitments, life insurance can be incredibly important. Let’s talk about when it makes sense to have life insurance and why it might be critical.
Taking Care of Your Family
A lot of people get life insurance to make sure their families are financially protected if something happens to them. Many families rely on the income of a parent or main earner, and if that income disappears, they would need a way to cover everyday costs like paying the mortgage. Life insurance offers a safety net to support your family if you pass away unexpectedly. There are also other options like income protection insurance if you get very sick or injured but don’t die.
If your living costs or mortgage payments depend on your income, having life insurance is essential. In the UK, about two-thirds of adults have life insurance to protect their families or dependents. If something tragic happens, savings, help from friends, or government support likely won’t be enough for the long-term. Some companies do provide a death-in-service benefit, but it’s often not enough for ongoing stability.
Types of Life Insurance
There are mainly two types of life insurance: Whole-life and Term-life policies. A whole-life policy covers you for your entire life as long as you keep up with regular payments, and it will pay out no matter how old you are when you die. On the other hand, term-life policies cover you for a specific period, like 10 or 25 years. These only pay out if you pass away during that term and are usually chosen to cover your working years. Sometimes, it makes sense to have a shorter-term policy to cover your family during your employment years.
How Much Does Life Insurance Cost?
The cost of life insurance depends on several factors: your age, lifestyle habits (like smoking, which can increase premiums), your job (riskier jobs can mean higher premiums), and the amount the policy will pay out. Despite these factors, most people find the monthly premiums to be quite affordable compared to the eventual payout. Even though you won’t get a refund, the security and peace of mind that come with life insurance generally make it worth the cost.
Who Might Not Need Life Insurance?
For some people, life insurance might not be necessary.