Life insurance can help your family if you pass away or receive a terminal diagnosis. If either of these things happens to you during your policy, your life insurance could pay out a cash sum to your dependents. While it can’t help ease their suffering, it can reduce the financial burden and any financially related stress for your loved ones.
Whether you need life cover depends on your personal circumstances. If you don’t have a partner or children or other dependents, you might not want to spend money on a life insurance policy. However, if you have a partner, spouse or children who depend on you financially, life insurance ought to be given significant consideration to ensure financial stability for your dependents if you were gone.
If you were no longer around, the loss of your income could create financial struggles for your surviving family and dependents. Life insurance therefore offers them some financial security to help them stay afloat during a difficult time and provide for their future. Many people with a mortgage on a family house also consider life insurance, to go towards the mortgage payments.
Deciding on Policy Coverage
There are tonnes of life insurance providers on the market, with many providers offering a whole range of different life insurance products, which makes it difficult to choose. A good thing to do before you start is to try and work out how much coverage you need using an online life insurance calculator and list any specific things you want your policy to cover, such as critical illness. Making sure you know what you want out of a policy will make it easier to find the right one for you.
When you’re looking for a policy, there are several essential things to bear in mind. The first is always to consider the terms of a policy, including the terminal illnesses covered and not covered. If a particular illness or disease runs in your family and isn’t included on the plan, you may be leaving your loved ones at risk if the worst happens.
Similarly, you must check the length of your policy to make sure it covers your dependents for the duration of time that they are most financially dependent on you – such as while your children are still in fulltime education. To start you off in your search, here’s a list of some of the most popular life insurance products on the market.
Employer Life Insurance
Aside from employers liability insurance, many employers provide a free ‘death-in-service’ cover, sometimes known as group life insurance. This kind of benefit will pay out a multiple of your salary to your family or loved ones, typically around four times your annual income, if you die while you are an employee of that company.
Although this is a significant company perk and can provide some peace of mind when it comes to looking after your family, you must remember that this benefit is only available while you are an employee at that company. If you leave the company years later and find yourself needing to take out a life insurance policy, your premiums will be considerably higher than if you had taken it out a decade before when you were younger and fitter. Most people tend to avoid relying on your company’s death-in-service cover as your only life insurance protection, particularly if you are the primary breadwinner in your household.
Reviewing and Updating Policies
Life can change quickly and drastically, and a change in your circumstances, for better or worse, might mean you are over or underinsured. To avoid paying too much or leaving your dependents short, you should consider reviewing your cover regularly. It’s particularly worthwhile to review your policy when there’s a significant change in your life, such as:
- at the birth of a new child
- when you move house
- if you change jobs or get a promotion
- when your children finish fulltime education or leaving home
- if you separate from a partner or get a divorce.
It’s also worth keeping an eye on inflation and how this might affect your policy. If your final payout is lagging well behind inflation. Make sure it’s worth the same amount as when you bought it or consider extending your cover.
