Do I Need Life Insurance?

What is life insurance?

The majority of life insurance policies available are designed to pay out a cash lump sum to your beneficiaries if you pass away while covered by the policy.

This money will be made available to your beneficiaries as soon as possible, to cover short term costs such as household bills and childcare costs whilst also having the intention to cover longer-term costs such as mortgage bills and schooling fees.

The amount of cover you need completely depends on personal circumstances. deVere advisers are trained to help you calculate the amount your family will need to ensure they are not left worse off financially in the event of your death.

Life insurance will pay out a death benefit to your dependents in a singular lump-sum payment or pay regular smaller payments over a period of time, depending on preference.

By taking out life insurance you can ensure that your dependents will be looked after financially if you are no longer there to do so.

Do I need life insurance?

Not everyone requires life insurance. However, those who do should prioritise it. If you have children, a partner or relatives who are financially dependent on you, you probably should have life insurance. You may also require cover for things such as mortgage payments, other existing debts or living expenses.

Many people also take out life insurance to pay for things such as tuition fees or funeral costs.

Who doesn’t need life insurance?

You may not require life insurance if you are single, your partner earns enough for your family to live on, or you have sufficient savings for your dependents to live off in the event of your death.

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Types of life insurance

Term

Term life insurance runs for a fixed period for example 10 or 25 years. This term could be designed to cover the time that you are responsible for children or mortgage payments.

Once the term ends the policy will cease.

n.b. there is no lump sum payment if the policy-holder outlives the policy term.

Whole-of- life

A whole-of-life policy will pay out no matter when you die, as long as premiums are paid during the term. Many whole-of-life policies pay a lump sum when a policy-holder reaches 96.

Decreasing team 

Decreasing term life insurance is a type of fixed-term policy aimed at people whose financial commitments reduce over-time – for example, if you’re repaying a mortgage. Because the payout reduces over time, this type of life insurance is generally cheaper than term insurance.

How much does life insurance cost?

This is dependent on your age, lifestyle, any pre-existing health conditions, and if you smoke or not.

Your premiums will also depend on how much cover you decide is required and the length of the term.

One of the best ways to save money longer-term is by taking out a policy at a younger age, the longer you wait to take out cover, the more expensive premiums will become.

You may be in a position where you do not yet have dependents, but in the future that might change. It is often cheaper to purchase life insurance at a younger age when premiums are lower. Life insurance premiums rise exponentially as you get older.

You might already have life insurance

Some employers provide life insurance known as ‘death in service’ benefits.

Make sure you read your employment contract carefully so you know your entitlement. 

It is important to remember that even if your employer does cover you, you might still want to take out further life insurance. When you leave the company you death benefits will stop, you may be unemployed for a while, leaving you and your family exposed and/or your next employer may not offer you the same benefits. At which point taking out cover may be exponentially higher, so it is normally a good idea to take out extra cover at an earlier stage.

You should also look carefully to see if your ‘death in service’ benefit is sufficient to meet your family’s needs.

Additional types of insurance

Life insurance covers you and your dependents in the event of your death. However, death is not the only thing which can stop people being able to provide for their dependents.

TPD – Total Permanent Disability cover pays out a lump sum in the event of the policy-holder becoming permanently disabled*.

Critical illness – Critical illness cover pays out a lump-sum in the event of the policy-holder being diagnosed with a critical illness*.

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