Would your partner or family be able to support themselves financially if you were to die? Would a loved one be left with debts in the event of your death? And could your family afford to pay for your funeral?
If the answer to any of these questions is ‘no’ then you should consider life insurance. However, it seems that only a minority of Brits have made plans to protect their family with new research finding that two thirds of people have no cover at all. Keep reading to find out more.
Two thirds of Brits have no life insurance
A new study has found that life insurance is low on the priority list of Brits. A survey from TopCashback has found that around two thirds of Britons have no life cover at all, despite the fact that half of this figure are parents.
The survey found that many Brits have overlooked life insurance in favour of other types of cover. Car insurance, home insurance and travel insurance were found to be far more common forms of cover taken out by UK households.
When quizzed about their lack of life insurance, half of respondents said that it had never crossed their minds to take out any cover or that they had investigated it and found it too expensive.
Of those who did buy life insurance, men tended to outnumber women. The majority were also aged between 21 and 30, which suggests that younger generations are more likely to ensure their loved ones are protected.
The survey also uncovered regional variations among those who did and did not buy life insurance. The North West had the highest number of people with life insurance cover, while Scotland had the least.
Making sure you have some life insurance is vital if you have debts, a partner or a family. But, how much life insurance cover should you have? We look at this next.
How much life insurance do you need?
If you’ve decided that you need to take out some life insurance, your next decision is ‘how much?’. While the calculation will differ from person to person, there are three factors that you should take into account:
- Your family’s needs – Work out how much money your household needs on a monthly or annual basis. Take into account any debts you have such as a mortgage, credit cards or loans. It’s also wise to include funeral expenses and any inheritance tax payment that may be due. The total of all these things should give you a good idea of the level of cover that you need.
- Your ongoing financial commitments – You should make sure you have enough life cover to meet your future financial commitments. For example, if you have children you need to be able to provide enough financial support until they are independent. Your life insurance may therefore cover things like your children’s schooling and University fees. If your partner will need to remain at home to look after your children then make sure your life insurance covers all their day to day expenses. Add all these factors together to work out how much your financial dependents would need.
- Consider what money you do have – When you have worked out how much life insurance cover you need, consider what assets you already have. Will your partner continue to work? Do you have any ‘death in service’ through your employer or any other life insurance policies? And do you have any savings, shares or investments that your dependents could use in the event of your death? The difference between your dependents’ financial needs and your existing assets will tell you how much life insurance you need to bridge the gap.