Four out of 10 homeowners with dependents don’t have any life insurance, even though it could leave their loved ones struggling financially should the worst happen.
Thinking about how your family would manage in the event of your death might not be the cheeriest of thoughts but having a financial cushion in place can provide valuable peace of mind that at least they won’t have to worry about money.
Yet according to research by comparison site MoneySuperMarket.com, only 59% of homeowners with dependants have cover in place. Neal Cross, life insurance expert at MoneySuperMarket.com said: “For so many of us, life insurance can seem like the last thing we need but the reality is that it’s an essential piece of protection, particularly if you’re a homeowner or have dependents. It can give you peace of mind that, whatever happens, major costs like your mortgage can be covered so that your dependents are left with one less thing to worry about.”
Separate research by Smart insurance found that the top reason why people don’t take out life cover is because they think it will be too expensive, whilst others think they don’t need it as they aren’t the main breadwinner.
Life insurance is in fact usually one of the cheapest types of financial protection policy you can buy, with premiums starting from as little as £6 to £8 a month for £100,000 of cover for someone who is in good health and is aged in their 20s or 30s. David Rees, chief operating officer at Smart Insurance, said: “There are a lot of common myths around life insurance – understanding what it really is, what it costs and how it can provide for your loved ones is key.
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“It’s so important to do your research and to be informed – you may think you don’t need life insurance if you’re single, or young and healthy. But life changes over time and taking out a policy now may help you secure cheaper premiums and give you peace of mind that you’re covered when those milestones occur.”
Don’t assume you don’t need cover if, for example, you’re not currently working because you are taken a career break to bring up your children. If you were no longer around, and the main breadwinner needs to continue working, life insurance could prove invaluable in covering the childcare costs, which can be very expensive, especially in the early years.
How much life insurance do I need?
When thinking about how much life insurance you might need, it’s important to consider not only all the bills you’d like to be paid off in the event of your death, but also whether you want your policy to provide additional financial support for your partner or any dependants.
For example, you may want enough cover to clear your mortgage and credit card debts, but also to give your spouse and children enough for them to live on for the next couple of years.
Before buying life insurance, make sure you check whether your employer offers this type of cover as an employee benefit. Some employers will pay out as much as four times your salary upon death, which means you might be able to reduce the amount of additional cover you buy. Bear in mind though, that whilst death in service benefit is extremely useful to have, if you leave your job or are made redundant, this cover will cease with immediate effect, so you may prefer to have standalone cover as well.