Here are five of the most typical reasons you should consider a policy.
1. To keep the family home
If your earnings are needed to service some or all of your mortgage repayments, the people you live with might no longer be able to afford to live there if you were to die.
There are special kinds of life insurance – often called term insurance or mortgage life insurance – which are designed to run for the length of a mortgage.
These typically reduce the amount of cover over time as your outstanding mortgage debt falls.
How long do you really need to keep old paperwork?
2. To support your children
Having children is one of the most common catalysts for buying life cover, given their reliance on both of their parents’ time and earnings.
However, while in the past our offspring’s financial reliance might have ended when they left home, current pressures on younger generations mean that their parents may be needed to offer support well into adulthood – as such, it may be worth looking at policies which offer extra years’ cover.
3. To put a value on domestic work and care
Life insurance isn’t just for people who work. One common mistake is to fail to insure the life of the partner who is responsible for bringing up children, caring for relatives and other valuable domestic work.
Even the death of a non-earning spouse can have a significant financial impact on a family – and they should consider life insurance as just as big a priority.
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4. To protect your pension
In many couples, pension provision is not equal and one partner – most commonly, the husband – tends to have a higher level of pension income.
In some cases, their other half may continue to receive payments even after their death. But if there is no provision for spousal cover in your pension, you could look at life insurance as a way to fill the gap.
5. To cover tax bills
Finally, life insurance in later life can also be a good way of helping your family deal with any inheritance tax bills that may be due on your estate.
You should also seek expert advice on having your policy “written in trust”.
Generally, payouts from life insurance held in trust are not subject to inheritance tax, and they can be made without waiting for the probate process to be completed.