Why you need life insurance. Yes, you!

Covered mag, presented by Gocompare.com
  • | by Felicity Hannah

Life insurance isn’t just for middle-aged business owners with large families and heart conditions.

As soon as you have any shared financial commitments or dependents, there are people relying on you and your salary. That can feel like a lot of responsibility but arranging life insurance should bring some peace of mind. But 60 per cent of adults in the UK don’t have life insurance, according to Barclays. That’s a lot of families and households left in a very vulnerable position if disaster strikes.

Who needs life insurance?

Sometimes it takes a major life event to make it obvious that you need cover. Many people take out a policy when they have their first baby, but you might decide you need cover once you have a mortgage or start a business.

Essentially, as soon as people you care about are relying on your contribution, it’s time to consider a policy. And that includes homemakers; don’t assume it’s just wage earners that need insurance. After all, childcare can be very expensive if something happened to the main carer – and no one wants to be worrying about the cost in that situation.

What kind of life insurance do I need?

There are many different life insurance options and it can seem a bit bewildering. If your circumstances are complicated or you need some advice on the right cover for you then it makes sense to get some help.

Contact an IFA, or speak to an adviser and get some free, impartial advice by calling 0844 409 9713*. If you visit our life insurance page then you can request a call back.

There are two main types of insurance – whole of life and term. A whole of life policy guarantees to pay out whenever you die, even if you make it past 90. Since death is a certainty and the policy has to pay out at some point, this is pretty pricey cover. Most people choose term insurance because it’s cheaper. This usually pays out a lump some if you die during the policy, which is a fixed length. If you live past the end of the policy then it never pays out. You can choose level term life insurance, where the cover amount is fixed for the whole policy. Alternatively, there’s decreasing term life insurance, where the amount paid out falls throughout the policy, usually as your outstanding mortgage decreases. That’s usually cheaper.

You may also decide to buy critical illness cover alongside your life insurance. This pays out if you fall seriously ill. However, most of these policies have a very specific list of illnesses they cover, so make sure you’re clear on what’s included.

How much cover do I need?

Deciding how much cover you need can be hard, there’s a lot to take into account. Consider how much is needed to clear your mortgage and repay any loans or debts. You also need to factor in funeral costs. Then, work out how big a lump sum you’d want the policy to pay out.

To check the number you arrive at is sufficient; divide it by the number of years you want to provide for your dependents. How does that compare to your annual salary? Will it be enough? If you compare life insurance policies on our site, there’s a calculator that will help you work out how much cover is right for your family. Don’t pay for more protection than you need, though.

Also think about whether you have any other policies that would pay out if you died. For example, does your employer make a payment in the event of your death? That could mean you only need a smaller, cheaper life insurance policy.

Finding the right cover at the best price

The bad news is that saving money can’t be your main priority with life cover, or any insurance policy. You need to make sure you have the right protection in place for your specific circumstances. If a cheap policy doesn’t actually protect your loved ones when it’s needed then the whole thing is a waste of money.

Not only that, but the best ways of getting cheaper premiums are beyond your control; for example, being young, being female and being healthy. But there are still some ways everyone can save money.

Compare cover

While finding the right cover is the main priority, you need to be sure you’re getting the best price possible on that cover. Compare life insurance policies to find the right cover at the best price.

Stop smoking

If you’re a smoker then you know the price of a pack is rocketing. But this demon weed pushes other costs up too. According to LifeSearch, premiums are around 50 per cent cheaper for non-smokers. Bear in mind that insurers only class you as a non-smoker if you’ve been cig-free for 12 months or more.

Move fast

The younger you are when you apply, the lower your premiums will be. You may be offered reviewable or guaranteed premiums. Guaranteed means the cost remains the same while reviewable can change based on wider statistics like general life expectancy or illness levels across the broader population.

Bear in mind that, while reviewable premiums may cost less now, they could rise in the long term.

Get fit

Many insurers require a medical examination before agreeing a policy and this can affect your premiums. So, if you’ve been meaning to shift a few pounds or take up running then do so, you could save some money. And live longer!

Other cover

If you do have dependents or financial commitments like a high mortgage or school fees, there are other insurances you could consider as well; for example, a health insurance or income protection policy. We have loads of guides to the different insurance policies available, which are a good starting point if you’re confused.

You’re unique

It’s worth remembering that this is a broad look at life insurance, and your circumstances are unique. While life insurance is a sensible decision for most people with kids or other commitments, there may be some people who don’t need this kind of cover. You should also be careful not to waste money by over-insuring yourself.

That’s why it’s a good idea to think carefully about your specific needs and discuss your situation with an adviser.


* If you decide to call LifeSearch calls to their 0844 number will cost 5p per minute from BT landlines. Call charges from mobiles and other networks will vary and may cost more. Your call may be monitored or recorded for training and security purposes.