If you have financial dependents - in other words, someone who relies on your income in some way, such as a spouse or child - then life insurance is an essential form of protection. It will provide your loved ones with some much needed financial support at a very traumatic time.
However, huge numbers of people in the UK that should have this form of insurance are instead going without - a study from comparison site CompareTheMarket.com suggested that less than a third of adults across the country have life insurance.
One factor that seems to put people off taking out the cover is the perceived cost. However, there are a number of ways in which you may be able to enjoy some life insurance cover without paying a penny.
Free life insurance for new parents
There are plenty of things to get your head around when you have a baby, from picking a name to getting to grips with nappies. Having a chat with an insurance company in order to arrange some life cover isn’t exactly top of the priority list.
Thankfully, a host of insurers offer cover to new parents for the first year of the child’s life without charging.
Aviva for example offers cover for up to £15,000 for a 12-month period. What’s more, you don’t have to take it out as soon as they are born - you can get the cover at any point until they turn four.
It’s a similar set up with Legal & General, though you can apply for the cover up to your child’s fifth birthday.
Death in service
Your loved ones may also be entitled to a payout from your employer should you pass away, as many employees have a benefit called death in service written into their contracts.
The payout is a lump sum from the employer to your family which is absolutely tax free, and is usually calculated as a multiple of your annual salary. So if your death in service cover is for three times your salary, and you earn £30,000 a year, your loved ones will get £90,000.
All employers are different when it comes to what level of death in service cover they offer, so it’s worth checking the small print of your contract to see just how much cover you are entitled to.
Consider a credit union
Another option here is a credit union. The idea is that you save with a credit union, and then should you pass away, the money you have saved is topped up before being handed back to your loved ones.
So for example if you saved with the Gateway Credit Union and passed away before you reached the age of 55, your loved ones would receive 200% of the money in your account. This drops to 175% for those aged 56-59, 150% for those aged 60-64 and 125% if you are over the age of 65.
Cutting the cost of the cover you need
Having some cover is better than nothing, but it’s important that you think carefully about just how much cover your family would really need in order to be comfortable financially if your passed away.
For example, if you have a £200,000 mortgage you would ideally want to have enough cover in place to clear that loan entirely. It may be that your death in service cover isn’t going to allow them to do that, so you’ll need to set up a separate policy.
In truth, life insurance is actually quite inexpensive - it’s not unusual for cover to cost less than £30 a month, though this will obviously vary based on the amount of cover you are looking for and your own health.
There are plenty of things you can do to keep the cost of your cover low as well. These include reducing the term of your policy, going for an alternative form of insurance like family income benefit, and even improving your health.