The simple answer to the question Who needs life insurance? is: anyone with dependents. Life insurance is an insurance policy designed to give financial support to the loved ones you leave behind if you die – so you only need it if you have other people who’d be financially affected by your death. This often includes:
Generally speaking, your household and family circumstances determine whether or not you need cover – namely: whether you have people relying on your income, or people you share financial commitments with. This is why the need for life insurance typically arises, or changes, after certain life events – like buying a house, getting married, or becoming a parent. These are common triggers for buying life insurance; but it’s also worth bearing in mind that the younger you are, the cheaper it is to buy life insurance. If you need cover, it's a good idea to get it in place sooner rather than later.
If you don't have any financial dependents right now, you probably don't need life insurance (because there isn't anyone who'd need financial support if something happens to you). Most people don't buy life insurance unless they really need it; but it's always worth keeping in mind how your circumstances – and therefore your need for life insurance – might change in the future.
Life insurance for couples
If you’re one half of a couple, it’s likely you’ll have some shared financial commitments, or that you’ll depend on each other financially to some extent. This is the case if you’re married, civilly partnered, or simply cohabiting. If one of you were to die, the other could be left struggling financially. Having life insurance in place is a way of protecting your other half – giving them the means to clear any shared debt and maintain the lifestyle you previously shared.
Life insurance for parents
Naturally, children are financially reliant on their parents – and bringing up children can be expensive. If one parent was no longer around, would your family still be able to pay for everything they'd need to? Most families budget according to the money they have coming in, so if one income was suddenly missing, it could lead to financial struggles. Life insurance is way of making sure that your partner and children could cope financially if the worst happens to you.
Life insurance for single parents
If you’re a single parent, your children will almost certainly be financially reliant on you – and may be more financially vulnerable if you died. In which case, it's particularly important to have a plan in place to provide for your children in case you’re no longer here. Life insurance is a way of making sure the cost of their guardianship can be taken care of – so you’d know they’ll always have the money they need for life’s essentials until they reach an age when they can support themselves.
Life insurance for homeowners
A mortgage is the biggest debt most of us ever take on in our lifetime. Having protection in place in case something happens to you is a no-brainer – and life insurance is a great way of achieving this for a mortgage, as it pays out a lump sum if you die. This money can be used to pay off whatever’s left of your mortgage, so your home is left to your loved ones. You can even get what’s known as ‘decreasing’ life insurance, so the level of cover you have in place decreases at the same rate as your mortgage.
Life insurance for renters
People often think they don’t need life insurance if they don’t have a mortgage – but many renters need protection too, especially if you’ve got a partner or children. Your rent is usually your biggest monthly outgoing. Would your family be able to keep up with it without your income? If not, life insurance is a way of making sure they’d have the money they’d need to continue paying the rent.
Life insurance for the self-employed
Being self-employed means you won’t have any protection in place through work – like ‘death in service’ cover, for example. Without this, it can be even more important to get your own plan in place. If you’ve got financial dependents who rely on you having an income, you’ll want peace of mind that they could support themselves financially if the worst happened and you were no longer around. Life insurance gives you exactly that.
- Anyone with financial dependents usually needs life insurance – because it means they have people in their life who rely on them financially in some way
- Life insurance is a way of making sure the loved ones you leave behind could cope financially without you and your income
- Life insurance is cheapest when you’re young, fit and healthy, so it’s a good idea to get some cover in place as soon as you need it
- Your life insurance needs might change as your life changes, so it’s also a good idea to review the cover you have in place after particular life events (like getting married, buying a house, or becoming a parent)