What would happen if you died after reading this post?
Quick! Watch the video before it’s too late.
Are you LifeAware? from Magical Penny on Vimeo.
Pretty serious stuff, right?
The idea of untimely death is the the trigger the latest financial movement, #LifeAware, over at another personal finance blog: Good Financial Cents.
As a personal finance blog, it’s a passion to make sure people are making financial empowered choices, including making sure you have life insurance if you need it.
Do I need life insurance?
What would happen if you died and couldn’t provide for your family? For many, life insurance is all about solving that potentially major problem.
But not everyone needs life insurance…. for example, I don’t have any because:
- No one is relying on my income except me
- I have no debt (including not having a mortgage) so if I were to die my estate would not owe anything to anyone
- Well..I have student loan debt, but that doesn’t count as student loan debt in England and Wales is excused upon death (may be different in other countries)
- I have enough savings to pay for my funeral and any other associated costs
- I am not earning so much money that I’ve run out of tax-advantaged places to put it…for example my ISAs and pensions
If you are the same as me in all of these points, then you may not need life insurance either. If you die tomorrow it would be a terrible tragedy but no-one is going to go hungry. However, if you are planning on taking out a mortgage in the near future or have a family relying on you as a breadwinner then life insurance should definitely be on your financial to-do list.
Would your family be OK financially if you didn’t make it home tonight?
It’s fun thinking about all the amazing things we want to do in life. But as much as we avoid the subject, accidents happen every day and can quickly end our plans.
For our cars we must have car insurance to cover bumps and crashes; for our houses buildings insurance helps address the risk that our homes may go up in smoke, or collapse to the ground. But what about our life itself?
No one likes to think about their own death. Our eventual death is hopefully a long time in the future, but for some unlucky people, life can be cut short.
Life insurance is shunned by some people because they view it as expensive or unnecessary. But for the majority of us, it doesn’t have to be expensive and it’s likely to be one of the most financially responsible things you do.
What Kind of Life Insurance do you need?
The cheapest and best type of life insurance is called ‘term insurance’ -where you pay a fixed amount every month for a fixed ‘term’ -typically 20 or 30 years. The point of life insurance is to help support your family should you die during the term period. Having it in place means you won’t leave your family in financial trouble if you’re no longer around. Whilst it’s not compulsory for everyone, you must have life insurance if you have a mortgage as the bank will require you to pay off the amount you owe them, regardless of whether you’re around to pay the bills.
How much does life insurance cost?
The monthly cost depends on the size of the policy –the amount of money your estate would receive should you die during the term period- but most polices are not more than a few pounds a month. Typically you should take out enough to cover any mortgage + several years of your salary. Some financial advisers recommend 10 years worth but you should decide yourself how much cover you want to take out. As for the length of the term, many people choose a time frame that takes them to an age in their life when they will not need coverage -when they think their children will have moved out or when they will have paid off their mortgage.
You might not know the exact amount of coverage you need just now but it’s worth getting something in place. Accidents can happen at any time so it’s worth looking into term insurance to make sure money is not a worry for the people you leave behind should the worst happen. The best part is once it’s in place, you can go back to thinking about more fun things, safe in the knowledge you’ve got things covered.
Hopefully this post has provided some food for thought so you can plan things to make sure your family are in as good a position as they can be!
Be sure to check out #LIFEAWARE at Good Financial Cents for more great information on life insurance!