Life insurance is a crucial form of cover for many of us. This form of insurance is a good way to ensure that your loved ones, like your partner or your children, are not left struggling for money if you pass away unexpectedly.
Having the cover in place isn’t enough on its own though. You need to think carefully about just how much cover you need - will your policy pay out a sufficient amount for your loved ones to pay off the mortgage, or to ensure your children can go to university, for example?
There are a number of stages during your life when it will be worth looking again at your life insurance policy, and establishing whether it’s time to increase - or even decrease - the level of cover you have in place.
Buying a house
Getting onto the property ladder is a big moment. Buying a property is likely the most expensive thing you’ll ever do, and with house prices having risen at a faster rate than wages, it’s something that is taking us longer than it used to.
That means more expensive mortgage payments, with many people unable to buy alone, and so opting instead to buy with a friend or partner.
But what would happen if you died? Would that person be able to pay the mortgage on their own? If not, then you definitely need to have life insurance in place, and at a sufficient level to ensure they aren’t forced to sell the property because of the size of the repayments.
This goes for when you move to a new property too. You might have had sufficient cover in place for that one-bedroom flat you started out with, but if you’ve now moved to a larger property to start a family, then you will also need to review whether your existing policy is large enough.
Tying the knot is more than just an excuse for a big party - you’re making a lifelong commitment to another person. That means wanting to make sure that they are going to be OK financially should you pass away before you reach old age.
As a result, making sure you have a suitable life insurance policy in place is an excellent idea. You want to ensure that the cover will not just pay off the mortgage or any other outstanding debts, but also provide your loved one with enough money to start over.
Having a baby
It’s not exactly a secret that having children is expensive. According to the Child Poverty Action Group, the cost of raising a child from birth to 18 is a whopping £75,000 for couples, jumping to around £101,000 for single parents.
What’s more, that excludes things like housing, childcare and council tax.
Given that expense, it’s a good idea to ensure that your life insurance cover is sufficient when you have children. While covering the mortgage may have been your main motivation when first taking out cover, the payout might not stretch far enough to help with the costs of parenting too.
It’s worth noting that a handful of insurers offer free life insurance to new parents. While it isn’t a huge amount, it’s at least some added protection that you can secure swiftly, before amending your existing policy to a suitable amount.
Having more children
Each and every time you have further children, it’s a good time to double check your insurance policy. The costs of parenthood only go up as your family gets bigger, so you want to make sure any payout will be enough to help keep your loved ones financially comfortable should you pass away.
A dedicated life insurance policy isn’t the only way that your loved ones will receive a payout if you pass away. Many employees offer death in service benefit, which will provide your family with a lump sum based on your annual salary.
It’s worth checking your contract to see just what you will get, as this can vary significantly between jobs and industries.
While it’s worth including this cover in your calculations when working out how much cover you need, when you move job it’s important to do those sums again - if your new job comes with smaller death in benefit, then you may need to increase the amount of cover provided by your main policy.