Why Have a Life Insurance
UK residents have been consistently bombarded by media adverts for life insurance, life assurance, funeral plans, pensions, and equity release in recent years. It can be very confusing to the average consumer, but the simple fact is, the UK population is getting older. The longer we live, the costlier it is for us personally and the government, so it's important that you make provision for your financial future. It is therefore important you understand the financial instruments available to you.
What is Life Insurance?
This kind of insurance is not necessary and not applicable for everybody. As its name implies, it is an amount of money paid out on the death of the policyholder. Its purpose is not to be of advantage to the policyholder, but to benefit the policyholder's family and loved ones. For a single person without dependents, there are other more appropriate choices.
The Benefits and Advantages of Insuring Your Life
- It's an investment: Insuring your life is an investment in the financial future of your dependents and family after you have passed away. The pay out of life cover can be a substantial financial cushion to provide your family with security when you are no longer there.
- It helps with a home purchase: It is common practice for UK mortgage lenders to ask that the people to whom they offer mortgages take out life cover. The insurance should be of a sufficient level to enable the mortgage payments to be made after your death, or at a level where your family can make up the shortfall between the payments and the cover.
- It helps to allay the stress of losing an income: Many modern families rely on two incomes and it can be a rude awakening to consider living on a single income when a partner passes away. It is a bit of a myth really that two can live as cheaply as one, because when one is bearing the greater burden after the death of a partner, it is still just as expensive. Mortgage, rent, utilities, and many other expenses do not decrease exponentially.
- It covers death expenses: One of the reasons you see so many TV adverts for funeral plans is because the costs of funerals in the UK have increased and continue to do so. If you have made an investment in life cover, there is no requirement for you to also take out a funeral plan.
- It is a safety blanket for serious illness and premature death: No one likes to contemplate their mortality and an early death is not something that can ever be predicted, but if you have a history of serious illness or medical conditions in your family, life cover is worth considering.
- It provides security for elderly parents: When you take out life cover, you are able to name your beneficiaries. You might be concerned that should you pass away before your parents, that they are able to cope financially in their golden years. Naming your parents as beneficiaries removes this concern.
- It enables grandparents to provide for grandchildren: One of the financial products that have grown in popularity un recent years is Over 50s Life Cover. This product is popular because there are no medical-questions asked and the policy should provide enough money to cover funeral expenses as well as extra for a surviving partner or grandchildren.
- It covers inheritance tax: Inheritance tax can make a significant dent in any significant sum you want to leave your surviving spouse/partner or children. Using the life insurance pay out to cover the inheritance tax enables your will recipients to receive and enjoy what you leave them.
When considering life cover, it is best to consult with an independent financial advisor who can explain the various financial options to enable you to make the right choice for you and your family.