Do you need life insurance?

Confused about whether or not you need life insurance?  Everyone knows that life insurance is a good idea, but it can be confusing to know whether or not you really need it. This is a short guide to help you decide whether or not you should take out a life insurance policy.

It’s a gamble
Life insurance is ultimately a gamble. It provides peace of mind that if you die within the insurance term, your dependents will receive a payout, so that they are financially secure.  If you don’t die within the insurance term, you will not get any of your money back – but you’re still alive, so that’s a good thing!  

If you’ve got a mortgage
If you have a mortgage but no spouse or dependents, you probably don’t need to purchase a life insurance policy. No one will be held accountable for the outstanding mortgage amount after your death; your lender will simply sell the house to repay the loan.

However, mortgage providers do encourage all homeowners to take out a life insurance policy when taking out a mortgage. In fact, it is common practice to purchase your life insurance policy from your mortgage lender (although this may not be the cheapest option); but the only time it is really vital to purchase a life insurance policy as a homeowner is if you have a dependent spouse and/or children. This is because if you die before you have repaid the mortgage in full your dependents will become liable for the debt. If they are unable to meet the repayments the loan will default and the lender may force the sale of the house to repay the loan.  

If you’ve got a dependent spouse and/or children
If you have a spouse and/or children who are dependent on your income you should consider taking out a life insurance policy, whether or not you have a mortgage.  You can purchase a life insurance policy that will pay a lump-sum amount in the event of your death so that your family will be financially secure, and can continue to live in the manner to which they are accustomed.  Consider a policy term that will cover your family at least until your mortgage is repaid, or until your dependent children leave home or enter into full-time employment. To discuss your options with an independent life insurance broker complete our online form.

Critical illness Insurance
The most common alternative to life insurance is to purchase critical illness insurance. This can also be included in your life insurance policy, but is often purchased as a stand-alone option.  Critical illness insurance will pay out a lump-sum if you are diagnosed with a pre-specified illness. This can be used for medical bills, to pay your mortgage, or to provide an income while you are unable to work. Critical illness is popular as you don’t have to die in order to benefit from the policy, and is a good idea for single people with a mortgage who don’t really need life insurance.

Please note: this website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.