News & Views

Life Insurance – you might need more than you think?

According to a study by Direct Line, only 35% of UK adults have any life insurance at all. 

Even if you are one of this 35%, it’s also important to ask yourself how much cover you might need, and whether you have made sufficient provision.

For many people, £200,000, or even £100,000, might sound like a lot of money, and many people might be reassured by having life insurance of this amount in force. When we look at all of the reasons why you might need life insurance, we begin to see that many people need a lot more than this:

• Covering your funeral expenses
• Ensuring the mortgage is paid off should you pass away
• Providing funds to replace your income should you pass away
• Ensuring funds are available to meet any inheritance tax bill your family might have to pay
• Providing a legacy for your loved ones

Having £130,000 of life cover will not even cover the mortgage for the average UK homeowner, and that’s before we begin to consider the other need areas.

Inheritance tax is only paid on a small minority of UK estates, but if it might apply to you, and you don’t take out life insurance to cover it, your relatives could be left with no means of paying a large tax bill of 40% of the value of your estate.

Replacing the income of a breadwinner can also be an area where you might need a lot more life insurance than you imagined. There might be some reduction in the household expenses if there is one less person to buy for, and having mortgage life cover will remove the mortgage payments from the household expenditure, but the monthly outlay is still likely to be substantial. Think carefully about what salary you earn and how your partner and dependants might manage without this income coming in.

Life insurance might be required to cover your income until such time as your children reach their early 20s. It might be required for even longer if you earn significantly more than your partner and they rely on your income.

If you earn £40,000 per year, you might need cover for at least half of this. If your children are likely to be dependant for another 20 years, this could mean there is a need for at least £400,000 of cover, and potentially more if you have a mortgage and/or an estate where inheritance tax might be charged.

If you earn a good salary, and had previously thought £200,000 of life insurance would be sufficient, ask yourself this question – Would you be willing to give up your salary for the rest of your working life, in exchange for a £200,000 one-off lump sum?

Here at Moneysworth, we would be delighted to hear from you if you want to take out life insurance for the first time, or if you think your life insurance provision might be insufficient. Our team of experienced protection advisers will carry out a comprehensive assessment of your circumstances and make a recommendation as to how much life insurance you really need.

Our particular specialism is arranging life insurance for people with all manner of different health conditions, who may find it difficult to get covered if they tried to arrange it themselves.We have won numerous financial services industry awards and our clients regularly give us superb feedback, so you really are in safe hands if you give Moneysworth a call.