Life insurance, also known as term assurance, is a popular form of insurance that people get so in the event of their death, their family and dependants will be able to cope financially. However, not everyone has a family and children, so do they need it? Read on to find out more.
Put simply Ė if you donít have debts (like a mortgage, credit cards,
loans) and you have no dependants, then you probably donít need life insurance. If you die and you do have debts, it is your next of kin that will be faced with paying the debts off, and also paying for your funeral, which generally cost at least £1000.
So even if you donít have dependants, but you do have debts, then it is probably a good idea to get life insurance so youíre not potentially leaving a member of your family with the responsibility for paying the debts off for you. Because unfortunately, just like a sum of money can be inherited, so can a debt. Many mortgage companies require you to get life insurance so the mortgage is covered if you die. A particular type called mortgage life insurance is a popular choice for people with repayment mortgages as the premiums go down over time as the mortgage debt decreases. However some people leave it to chance, so if they did die, the dependents would probably need to either sell the house, or continue the mortgage repayments themselves.
There are choices to be made on the way you want your life insurance to work too. There are three types: level, decreasing and renewable, and they all charge you differently.
Level term assurance means that the premium and sum covered stays the same, so itís good for those with interest only mortgages or those who want to leave a lump sum behind.
Decreasing term assurance decreases year by year in line with a repayment mortgage Ė as the sum you are insuring is going down. Itís not the choice for those who want to leave a lump sum.
Renewable term assurance offers insurance for a short period of time, usually between 5 and 10 years. You have the option to renew at the end of the term but it will be a lot more expensive, which is the downside to this type. You can insure quite large amounts however, and the premiums are usually quite low for the initial policy.
If you decide that you do want to leave a lump sum behind, then think about how much your dependents would need to maintain the same standard of living. For example, your yearly salary would be a good indication.
Then multiply that amount by the number of years that you think they will need to be financially supported Ė and thatís the amount you need to insure for. Donít listen to the life insurance companyís estimation of how much cover you need, they invariably overestimate by a large margin.
Life insurance doesnít have to be expensive either. A 35 year old man wanting £100,000 worth of cover for 20 years can be covered for less than £8.50 a month from insurers like Sainsburyís, Virgin Money, Asda, AA and Egg Ė and a number of other big name insurers like Norwich Union, Standard Life and Legal & General come in at less than £9 a month Ė so itís not going to break the bank!
Search on the Internet for the best deals and youíll also benefit from discounts exclusive to Internet applications. By filling in the quotation forms over the Internet, youíre saving them time and money, so they pass on some of the savings to their customers.
If you think you might need life insurance, then why not get a few quotes Ė you may be very surprised at how cheap it is.
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