Do I need life insurance?

Life insurance explained: why get life insurance? 

While it’s a tough topic to talk about, there may come a time when you’re unable to be there for your family. Life insurance can provide them with financial support if you die or are diagnosed with a terminal illness and have a life expectancy of less than 12 months.

If you’re wondering “why get life insurance?”, consider the kinds of things it may help to cover, like:

• Helping to pay the mortgage on your home
• Helping to take the burden off everyday living expenses such as bills or childcare costs.

Is life insurance a legal requirement?

No, there is no law that requires people to take out life insurance. However, many mortgage providers won’t lend to you if you don’t have a life insurance policy in place. 

Decreasing life insurance can be taken out to cover a repayment mortgage (among other living costs). It’s designed so your cover reduces over time, roughly in line with your mortgage. So, if anything happens to you, your partner and family could use the payout to help pay the mortgage on your home.

Who should get life insurance?

There are different types of life insurance to suit different needs, whether you’re after financial protection for your family or reassurance for your mortgage provider.

Families

It’s hard to imagine a time when you’re not around to support your family, but knowing you have financial protection in place for them may help to reassure you. Families may benefit from a life insurance policy that will help pay the mortgage to keep your family in their home, and support everyday living expenses such as household bills, childcare and even holidays. 

Couples

As a couple, you may decide to take out a life insurance policy for peace of mind. If one partner dies while covered by the policy, the other will receive a cash sum to help towards paying off the mortgage or other shared expenses. Joint life insurance can cover both members under a single policy, and just one monthly payment.

Self-employed people

Self-employed individuals may have less occupational benefits, like death in service benefit. So, life insurance could offer a financial hand to your family if you die or are diagnosed with a terminal illness.

People with a mortgage

If you’re buying a house, you may find that your mortgage provider requires you to take out a life insurance policy. This reduces the risk for lenders by ensuring that the mortgage will be repaid, even if the borrower dies. Decreasing life insurance may be a suitable option for you, as the cover level decreases roughly in line with the way a repayment mortgage does.

Over 50s 

If you’re over 50 you may decide to take out over 50s life insurance to cover you for the rest of your life. It’s designed for those who wish to leave a small cash sum to their loved ones when they die which can be used to help pay funeral expenses or simply left as a gift.

When should you get life insurance?

While there’s not a specific time you should take out a life insurance policy, most people choose to get life insurance when they enter a new life stage. For example, this could be when you buy a house, have a new baby or just re-evaluate whether your family or dependants will need financial support if you unexpectedly pass.

Should I put my life insurance in trust?

Putting life insurance in trust is a way to protect your family’s future, as you can manage how your beneficiaries receive their inheritance. Trusts are a legal arrangement that allow you to leave assets to friends or relatives. A trust is managed by one or more trustees – which can be family, friends or a legal professional – until it’s paid out to your beneficiaries when you die or on a specified date.

Whether you leave your life insurance in trust is up to you – there are different options to consider from Discretionary Trusts to an Absolute Trust. Some people decide to do so to have more control over your assets and tax protection, but the decision is irreversible and still sometimes subject to Inheritance Tax.