Five things you might not know about life insurance

Image of vaguely scientific looking stuff
Life insurance needn't be mind-boggling
"Many people start thinking about life insurance when the midwife hands them a baby and the absolute terror of overwhelming responsibility kicks in"
  • | by Felicity Hannah

Let’s be honest, life insurance isn't the funnest thing to think about. It’s not a topic to bring up in the pub with your friends and it’s not something you're particularly likely to enjoy shopping for.

But it is important and in the few cases where it's claimed, it's essential.

But life insurance is also often misunderstood. That’s why we’re taking a look at five things you may not know, but really, really should.

1) You might already have some cover

Taking out a tailored life insurance policy can give you peace of mind that your loved ones and commitments will be taken care of in the event of your death.

But before you take out a policy, it's worth checking whether you have some protection in place already. Some employers offer a ‘death in service’ benefit, often of around four times your annual salary, so you should check if your employee perks include it.

After all, having that kind of cover in place would reduce the amount of protection you need to buy. And if you only need to cover expenses relating to your death or to help your partner, then that company benefit might be enough to cover you with no extra insurance needed.

However, if you have a mortgage, other debts, or young children and commitments like school fees then it's unlikely to be enough on its own.

2) Stay-at-home-parents need it too

Many people start thinking about life insurance when the midwife hands them a baby and the absolute terror of overwhelming responsibility kicks in. But a mistake parents often make is assuming that only the main breadwinner needs to take out a policy.

If one parent is taking a baby break for a few years then it’s easy to decide that they don’t need insurance – after all, the household is managing without their wage, right?

Wrong! Actually, think about what that non-earning parent is contributing to the household.

That’s right, hours and hours of childcare while the other parent's at work. If your family includes a stay-at-home parent then you need to factor in how much it'd cost to replace that childcare if they weren't there. One recent report valued a stay-at-home-parents' contribution at £32,000 a year – make sure you insure against the risk of losing such a contribution.

3) It doesn’t cost a fortune

Life insurance is not desperately expensive. Well, not unless you’re a millionaire smoker with a sky-diving habit and a dicky liver.

But assuming you’re relatively healthy, life insurance can be extremely good value. It can cost just a few pence a day to provide your loved ones with the financial protection they'd need if you were no longer there to shelter them yourself.

And it doesn’t need to rocket in cost even if you’re older. Research by Which? carried out back in 2013 found that the average premium for a 54-year-old non-smoker who wanted £100,000-worth of cover was less than £1 a day. That’s equivalent to a newspaper or daily chocolate bar.

The other good news is that you can tailor it to your specific circumstances and reduce the cost accordingly. For example, you can take out a policy that decreases in value as your mortgage is gradually repaid – meaning you’re never paying for cover you don’t actually need. That can help keep the premiums low throughout the lifetime of the policy.

There are lots of ways to make life insurance even more affordable, including comparing policies. Read our guide to keeping the costs down for more information.

4) There’s more help available

Life insurance can be a weight off your mind. Knowing that your family or partner would be taken care of if you weren’t there is a big relief for most people. But what if you fall ill or become unable to work? Life insurance protection only goes so far.

However, some policies also offer critical illness cover as an add-on, or you can buy it separately. These policies pay out if you became seriously ill and could be a major support if you found yourself unable to work. Check out our guide to critical illness cover to learn more.

5) No-one wants you to claim

The thing with life insurance is that no-one wants you to claim, not the insurer and not your family. And that's why getting healthy can reduce your premiums; you’re a much lower risk if you’re a healthy weight, if you don’t smoke, if you exercise and you don’t drink to excess.

If your premiums are high because you've indulged in a few bad habits, then you can still ask for them to be adjusted once you've proved you're living a healthier lifestyle. For example, most insurers will cut the cost of a policy if you’ve avoided cigarettes for a year or more.

There, that wasn’t so bad, was it? Now you can reward yourself for thinking about life insurance by reading something lighter. We recommend 'Four signs your cat is taking over your life '