There are many reasons to purchase a life insurance policy, but here are five of the biggest:
1. To pay for the funeral
According to the Royal London National Funeral Cost Index Report, a burial funeral cost an average of £4,136 last year, and a cremation funeral cost £3,214. In some parts of the country, a burial funeral could cost £7,000 or more due to the demand for gravesites.
A life insurance policy will mean that your relatives will not be faced with struggling to pay for your funeral.
2. To support your children
Raising children, then financially supporting them through college or university, is expensive. If you die before your children have grown up, a life insurance policy can financially support them.
Even if you are a stay-at-home parent with no income, it makes sense to buy life insurance as it can help with the cost of extra childcare that your partner may need to spend if you die.
3. To replace your partner’s income
Many households rely on two incomes to support their lifestyle. If you die, your partner’s income may not be enough to maintain the lifestyle your family is used to. Life insurance can make up for this drop in income without cutting back on your family’s lifestyle.
4. To pay off debts
The largest debt that many households have is the mortgage. A life insurance policy can make sure that the mortgage is paid off if you die.
You may have other debts, such as credit card bills and bank loans. Life insurance can pay off these debts if you don’t have enough savings to cover them.
5. To cover inheritance tax
If your estate is worth over £325,000 when you die, inheritance tax is payable. Life insurance can cover a tax bill that is due after you die.
How much do you need to insure?
Ideally, life insurance should replace the after tax income that you earn so that your family can continue to have the lifestyle that they are accustomed to.
As well as replacing your income, you should have enough insurance to pay the funeral costs, any inheritance tax that will be due, and the cost of paying off the mortgage and other debts.
Obviously, the more the amount insured, the higher the premiums will be. Whole life insurance that guarantees payment whenever you die is more expensive to buy than term insurance, where you are insured for a fixed length of time.
The one certainty in life is death, and we just don’t know when it could happen. Life insurance protects you and your family from the unexpected loss of a loved one and the financial burden it can place on the family.
For more help and information, talk to a life insurance expert at Ascot Mortgages. There are a wide range of insurance providers and life insurance options available, and we can find the right policy for your individual situation.