The importance of life insurance
If you were sick and unable to work, or even died, could your dependents survive without you? This is something everyone with a family should think about, no matter how unpleasant it is.
If you are young and single, life insurance is not that important, but everyone with a family needs to think about it. When you buy a house and owe a mortgage and when you start your family, it is time to think about protecting them if something should happen to you.
Some employers promise their staff a death-in-service benefit, often about four times your annual basic salary. Although that is great, it wouldn’t pay off the mortgage or provide an education for your children.
Life insurance is essential if you want to guarantee the financial security of the people you love.
If you’re the main breadwinner in your household, you will want to consider life insurance, but it’s not just the main wage earner that needs to think about cover.
For example, if you have a partner who is caring for your children and that person died, you could face new costs such as having to pay someone for childcare.
The most popular and simple kind of protection is called term insurance, where your family receive a payment in the event of your death. This can be bought singly or jointly and you can specify the term, for example, the length of the mortgage, or the estimated dependency of any children.
This is the least expensive type of insurance and the type of insurance we will focus on in this article.
You again have a number of options. You can buy level cover, which will pay out a fixed lump sum if you die during the policy. But you could also choose increasing or decreasing cover.
Increasing cover protects you against inflation. The payment your family would receive should you die is tied to the retail prices index or average earnings. That means the cover wouldn’t devalue over time.
Decreasing cover is for people whose main concern is the mortgage. As the mortgage is gradually paid off, less cover is needed, so it falls. This can be a useful way of bringing down the price of premiums, but people with other commitments, like children, may want a more substantial policy.