Life Insurance – Do I Need It?
You’ve probably heard of life insurance but what is it exactly and most importantly how would it benefit you?
What is Life Insurance and what is it used for?
In a nutshell life insurance pays out a sum of money if you die. This money is typically paid to your partner, spouse or children and it protects them from financial hardship and an uncertain future in the event of you dying.
Protecting your Family
If you are married or in a relationship and have children who are financially dependent on you then the chances are, life insurance is vital. If you died would your spouse or partner struggle to pay the rent or mortgage? Would they still be able to go on a family holiday each year? Could they afford to pay for after school clubs, swimming lessons, birthday and Christmas presents, university fees, utility bills, run a car, buy groceries and all the other expenses life throws at us?
It’s easy to underestimate how much running a household and raising a family costs. Try punching your details into this handy life insurance calculator by Aviva and you may be shocked at just how much these costs could amount to.
Stay at Home Mums & Dads
You may think that if you don’t work there’s no need to take out life insurance. But if you died who would look after your children? Would your partner have additional childcare costs? Perhaps they would want to work less hours and spend more time with your children, especially at such a tragic time. Would this be possible financially though? A life insurance payout could give your family options and relieve the financial stress at a very difficult time.
Protecting your Home
One of the biggest purchases you’re likely to make is your house. Whether it’s your first house or you’re moving to a new one, buying your own home is an incredible feeling. It’s where you keep everything that’s personal to you, where you raise your children, it’s your safe haven. It’s also a financial investment and over the years you’ll accumulate an increasing amount of equity in the bricks and mortar of your house. So naturally it makes sense to safeguard this emotionally and financially valuable asset.
A mortgage life insurance policy would pay your mortgage off if you die. So if you die before your mortgage is repaid your spouse or partner can pay off the remaining debt and live mortgage free, significantly reducing financial pressure on your family.
Inheritance Tax Planning
When you die everything you own forms part of your estate. If this is valued at more than the inheritance tax threshold (currently set at £325,000 for an individual and £650,000 for a married couple as of 2017) you will be taxed at a whopping 40%! This is a hefty price to pay for savings and investments that you’ve worked hard to build up over your lifetime and it could mean that you leave your family much less than you had hoped to.
A life insurance policy can be set up in a certain way so that it doesn’t form part of your estate for tax purposes. This policy can then be used to pay your inheritance tax bill making it a very tax efficient way to protect your family’s inheritance.
Single People with No Dependants
If you’re single and nobody depends on you financially life insurance isn’t something you’ll generally need. There are other types of insurance such as Income Protection and Critical Illness Cover that would benefit you though. If you’d like to learn more about these please fill in the form below or give us a call.
Do you Need Life Insurance?
If you’ve read this far you can probably decide for yourself whether you need life insurance. If you are still unsure and would like some free advice or if you’d like us to find the right life insurance policy for you at the best price give us a call on 01332 416470 or simply fill in the form below and we’ll get in touch.