When should you take out life insurance?
Published 17 November 2016 by Emily Bancroft
Is there a right time to cover yourself?
Thinking about what would happen when you’re gone can be tough but it’s important to think about how your family could cope. Could they afford the mortgage, for example? Or how would they cope with the cost of childcare?
That’s why you might be considering a life insurance policy. But how do you know when it’s the right time to get life insurance? And how long should the policy last? We’ll take you through some of the reasons why you might get a life insurance policy, so you know if it’s right for you.
Buying a house
Life insurance can pay out a one-off amount or a monthly sum if you pass away while the policy is still active. The money goes to your loved ones and they can use it for household bills or the cost of your funeral.
That’s why you might think about life insurance when you get a mortgage. If you weren’t around anymore, would your partner still be able to pay the mortgage or would they struggle? Life insurance could help to pay the rest of the mortgage off, so your family could stay living in the house.
Having a baby
Becoming a parent can bring a lot of things home to you as now you have someone who relies on you. If you passed away, your family might not be able to afford childcare or any of the other costs that come with having a baby.
Life insurance could help to replace your income, so your loved ones could still get by. It obviously wouldn’t help to replace you but it at least could lift some of the financial burden.
If your partner works as well, you might want to think about a joint life insurance policy.
Any other reasons?
If you don’t have a mortgage or any other dependants, that doesn’t automatically mean you shouldn’t cover yourself. You might not need life insurance if you’re single, but critical illness cover might be worth considering. This could help if you had a long-term illness or condition which meant you couldn’t work – the pay-out could help you cover your household bills.
How long should it last?
Life insurance policies can either last for a set number of years (term life) or until you die (whole of life). Term life insurance is cheaper but your loved ones will only get a pay-out if you die during this time. If you want to stay covered after this, you’ll need to take out a new policy.
If you’re just looking to cover your mortgage, you might think about decreasing term life insurance. This is where your potential pay-out falls in line with the value of your mortgage or another loan.