6 reasons why you need life insurance

No one likes to think about a time after they’ve gone, but buying life insurance could offer reassurance and comfort to you and your loved ones for this situation.

In fact, when we recently asked 2,000 people from the UK¹ about their attitudes and approaches to life insurance, 42% of respondents with life insurance said peace of mind was their main motivating factor for buying it.

Why should I get life insurance?

For most of us, life is a series of important milestones that may cause us to think about the future. Inevitably, when we think about our life and beyond, we can’t help but think of what may happen to the people we leave behind. Your family or close relatives might have to pay for any money you owe or costs you have, like childcare, a mortgage, or even funeral and medical bills.

Even if you don't owe any money, you might want to leave something for your loved ones, help with your dependents’ future living costs or set aside a small amount for your funeral. Whether you wish to leave £5,000 or £500,000, the benefits of life insurance and getting it early can go a long way to offering you peace of mind.

Do I need life insurance?

To decide if you need life insurance, think about what you pay for and how it would affect your loved ones if you weren't around.

If your expenses wouldn't be covered by income, investments, savings, a pension, things you can sell, or a death in service benefit from your job, you might want to think about getting life insurance.

You might have just taken out a mortgage, which means you have a big financial responsibility. If you have children, you might be paying for a private school or many after-school activities. And funerals can be expensive, even if modestly done.

Besides the basics, there are many costs like running a home, other insurance policies and raising children. These all add to the cost of living but can be overlooked. If you don't have much set aside for your loved ones after you die, life insurance might be something to seriously consider.

When should I get life insurance?

It’s no secret the UK is a time-poor nation. We have ever-growing piles of tasks to be completed.

According to our research , over six out of ten (63%) of us admit to feeling weighed down by our to-do lists², causing tasks to be delayed and fall through the cracks. Getting life insurance was one such task, languishing on the to-do lists of 42% of those we asked who have life insurance for over a year³ before they finally got around to buying it.

For many, the decision to get life insurance was prompted by major life changes. Here are a few of the main reasons.

1. Buying a new home

Our research shows that nearly one in four British respondents who have life insurance (23%) buy it mainly because they bought a house.

If you die before paying off your mortgage, someone you love might have to take over the payments. Mortgage life insurance helps make sure your loved ones can handle these payments after you're gone.

Decreasing term life insurance is a type of cover that helps if you have a repayment mortgage or other sizeable reducing debt. The longer your cover is in place, the less is paid out. This is because your debts are also decreasing, and the insurance is there to help cover these payments. The monthly premiums for this type of policy may also be lower.

If you have an interest-only mortgage, you might be more interested in level term life insurance. This is where payouts are fixed and the policy is in place for a pre-determined amount of time. The advantage of this kind of cover is that your family’s payout would be the same whether you died a year into your policy or a year before it expired.

2. Just married

If you've recently become engaged or married and are combining families and assets, it's helpful to know you're both covered if one of you dies. Life insurance lets you support your partner financially after you're gone. Nearly one in five people (18%) who have life insurance said they took it out for this reason.

Many newlyweds find themselves asking: “What life insurance should I get?” as the types of policy vary.

You can choose a single policy, which covers just you, or a joint policy, which covers both partners. A joint policy is usually cheaper but only pays out once, so the surviving partner would need a new policy.

Two single policies pay out on each death and can be simpler if the relationship ends. But, if a relationship breaks down, a joint policy can't always be split into two single policies. Also, claiming on a joint and then getting a single policy later can be expensive because premiums go up with age.

3. Having children

Having kids was the main reason nearly a third (31%) of people in the UK bought life insurance, according to our survey. Raising a child is expensive, even before thinking about private school or university costs. There are policies that last until your child is grown up. And, after they turn 18, you decide what "grown up" means.

Getting life insurance to protect your child from the unexpected can give you peace of mind and help you enjoy your time with them more. Level and increasing cover are types of policies that pay out a lump sum if you die within the agreed time. If you want to leave money to your kids instead of paying off debts, you might consider an increasing or level term policy.

4. Planning for a funeral

The cost of funerals can run into thousands of pounds. Over 50s life cover could help pay off this cost. Contributions for this type of life cover tend to be smaller than others as the payout is significantly lower.

Over 50s life cover differs from term life insurance in that there is no fixed length to the policy. The cover lasts your whole life and pays out upon your death, as long as you've kept the policy in force by keeping up with the monthly premiums.

With some insurers, the premium payments last your whole life; with others there's a fixed payment term. With Post Office Over 50s Life Cover, for example, the payment term is until the policy anniversary on or after your 95th birthday (or until death if sooner). Also, our protected benefit feature means that, if you had to stop paying your monthly premiums early, we'll still pay out at least half of the cover amount on your death (as long as you're at least halfway through the payment term). Read the policy terms and conditions for full details.

5. Inheritance tax

Another reason people may decide they need life insurance is inheritance tax. It can be a big worry for people who want to leave money to their children when they die. The tax bills can be very high and take away a lot of the money meant for the kids. But, if you get a life insurance policy that covers the tax, your children can get all the money you wanted to leave them.

Some people choose to put their insurance policy into a trust. Trusts have important legal rules, so you should talk to a lawyer or financial expert before doing this. Once you put your policy in a trust, it's hard to change it, so you need to be sure about your decision. There are different types of trusts, so think about how you want your money to be managed in the future.

6. The next generation

Getting older is a part of life and often makes us think about things. If you're at a point where you're thinking about the future – maybe because of age, ill health or any of the reasons we’ve already covered – you might worry about your family's financial security. Life insurance can help you put these worries to rest and focus on enjoying the future.