Do I need life insurance?

Before we dive into who needs life insurance, let’s briefly explain what it is. You pay a regular premium to your insurance company, and in return, they pay a lump sum (called a death benefit) to your nominated beneficiaries if you pass away while the policy is active. There are various types of life insurance policy.

People sometimes mistakenly assume life insurance isn’t relevant for them. They might believe it’s only for parents, those with large debts or the wealthy looking to manage their estates. Others rely on death in service benefit with their employer – without checking whether this would actually meet their family’s needs.  

But the reality is that it’s worth everyone taking a moment to consider life insurance and the financial security it provides. If the worst happened, would your loved ones be financially comfortable? Life insurance can be used to take care of everything from the outstanding mortgage to funeral fees, everyday expenses and education costs. 

What happens if you don’t have life insurance?

If you die and other people rely on you financially, it can cause immense extra stress at the hardest of times. No matter whether you’re single, have children or are married, could your death cause financial hardship for others?

An Aviva study of people who had lost a partner showed that many surviving partners had to cut back financially – particularly if they didn’t have life insurance. Its research shows that 38% cut back on luxuries like holidays, 39% spent less on food shopping, 22% used credit cards and some 28% sold off some of their own belongings. 

If anyone would struggle to manage financially if you weren’t here to cover costs, life insurance could be worth buying.

When considering life insurance, think about the potential financial impact your death could have on those left behind. Here are five major costs that life cover can help your loved ones manage:

1. Your mortgage: Would your loved ones be able to pay the mortgage if you were to die? If not, it could leave them vulnerable to losing the family home or falling into debt. If you live alone or are single, you may still want to leave your home to someone you love.
   
2. Day-to-day bills: General living costs could be a struggle to meet for your loved ones without your income. Any surviving partner might have to change jobs, take on extra work or even sell their home to try to cover the shortfall. It could be even harder if you have children.
   
3. Your funeral: The average cost of a funeral in the UK is £4,706. Would that be a stretch financially for your family?
   
4.  Education costs: If you have children at private school, they may have to move schools if the fees can’t be covered, causing more upheaval at the worst time. It could also be difficult to pay for older children going to university or further training.
   
5.  Any debts: If you have any joint debt, the debt will pass to the other person to be paid. Your own debt will be paid for by your estate. A life insurance payout can go towards paying off joint or single debts. 

People may think that life insurance is for other people – the wealthy, families or homeowners. Or they might never think about it at all. Often, it only comes up when someone is buying a home.

But life insurance is something nearly every adult should consider, as it can help keep your loved ones financially secure in the event of the unexpected. The following are different scenarios that can make buying life insurance a smart decision. Which one applies to you?

Find the best life insurance for you.

Any time is a good time! Usually, the younger you are, the cheaper your life insurance premium is likely to be. The average cost of life insurance for a non-smoker aged 25 is £5.43 (level term insurance £100K sum assured  over 25 years), whereas it’s £41.67 for someone aged 55, according to Moneyfacts. The equivalent average cost for a decreasing term life insurance policy is £5.10for a 25-year-old and £26.93 for a 55-year-old.

It’s often a change in circumstance that prompts people to think about life insurance, like buying a house or having a child. And every time something like this happens, it’s a good idea to review your cover. Even if you already have a policy in place, you’ll want to check it still meets your needs.

Seven life events that could shape your life insurance needs

These key life moments might be the perfect time to think about taking out life insurance or reviewing the cover you already have:

1. I’m having/adopting a baby - This is the ideal time to put cover in place to protect your growing family if you pass away.
2. I’m getting married - If your new spouse would struggle to cover your share of the bills, life insurance can make all the difference. You can choose between a joint life policy or a single policy. A joint life insurance policy is usually a bit cheaper, but it only pays out once, even if both policyholders die at the same time. You may want to consider two single policies rather than life insurance on a joint life basis.
3. I’m buying a home - Mortgage life insurance can cover the cost of your repayment mortgage if you die. If you have an interest-only mortgage, level term insurance could be better for you.
4. I’m remortgaging - Now’s the time to review your insurance. Does it still cover the right amount and length of time?
5. I’m leaving my job - If you had death in service benefit through your job, you might want to arrange other cover to replace this.  
6. I’m getting divorced - It’s a good idea to review the cover you have to check it still works for you, particularly if you have children or a joint policy with your ex.
7. I’m estate planning - Life insurance can play a big part in your future provisions for your loved ones. Whole of life insurance pays a lump sum to your beneficiaries if you pass away or if you become terminally ill. Unlike term life insurance, it never expires and will continue as long as you keep up your monthly premiums. A financial adviser can help make sure you have everything in good shape to meet any inheritance tax liability.   

Quick quiz: Do I need life insurance?

Answer these questions to see if life insurance is something you should take a look at. 

• Do you have any dependants?
• Would anyone be financially affected by your death?
• Do you want to leave a legacy or financial gift? 
• Do you want to cover the cost of your funeral?
• Do you have any debt? 
• Do you have a mortgage? 

If you answered ‘yes’ to any of these questions, then life insurance could be a good choice for you. You can explore our guides to learn more about how life insurance works and which of the different types might offer the best financial protection for you.

You might not need life insurance – not everyone does. For example, if you live alone, no one relies on you financially and you have savings to pay for your funeral, there could be no need to spend money on life insurance premiums.

If you have significant personal savings and assets that would easily cover your loved ones’ needs, you might not need it then, either.  

Some people have death in service cover from their employers. But it’s important to check that this would be enough to ease the financial strain if you did die. And don’t forget to review things if you change jobs. 

Do you need life insurance if you have savings? 

It depends. If you have a lot of savings, you might feel that would be enough to take care of your loved ones financially. But it’s important to weigh up other factors, too, especially if you have people relying on you. How long would your savings last and would they cover everything your loved ones need, like mortgage debt, unexpected expenses and bills?  

Do you need life insurance if you’re single? 

Yes, there are some cases where you might want to get life insurance. For example, the payout could be used to pay off your mortgage, leave a legacy to a loved one or to cover your funeral costs.

If you have children or other dependants and you’re single, it’s all the more reason to get life insurance cover. Check out our guide to life insurance for single parents.

Do you need life insurance if you’ve paid off your mortgage? 

You might do. Life insurance can cover much more than just the mortgage, so can be used to support your loved ones financially even if you don’t have a mortgage. For example, it could pay for household bills, childcare costs and a fitting send-off.  

Do you need life insurance if you don’t have any debt? 

There are lots of reasons you might need life insurance, even if you don’t have any debt. If you have anyone depending on you financially, life insurance is a good safety net for them. It can be used for everything from unexpected bills and funeral fees to education costs and everyday expenses. 

Getting the right cover   

To work out how much life insurance you’d need, there are lots of things to consider. For example, you’d take into account any debt, including your mortgage, your savings, your regular bills, your partner’s earnings and your children’s education costs.  

It can be quite tricky to work out, so it’s often helpful to get expert advice from a financial adviser or insurance broker. They can help you decide how much cover you need and the best policy for your particular circumstances.

More than just a cash sum 

Nowadays, some providers offer extra features and benefits when you take out a life insurance policy with them. For example, some give you terminal illness cover at no extra cost. You can also snap up cover that comes with wellbeing services, health checks and nutrition support, which means that life insurance can offer value above just a financial payout. Others offer gift cards and discounted gym memberships.

Of course, it’s important not to choose your life insurance and provider solely based on the perks that they offer, especially as they can be removed at any time. You need to be confident the life cover itself is right for you. To see how providers compare, read our guide to the best life insurance companies.

If you feel ready to take the next step and would like expert assistance with arranging life insurance, please complete our form, and we will connect you with a broker to discuss your requirements.