Should You Buy Life Insurance Now? Here’s Why It Matters.

The idea of departing from this world and abandoning cherished family members is an unpleasant notion for anyone. Nonetheless, it's crucial to contemplate how your absence might affect your relatives and financial situation—and this is precisely why life insurance becomes essential.

Life insurance frequently gets ignored or evaded, leaving individuals puzzled about it or maybe not seeing the necessity of understanding it. In this discussion, we've consulted financial specialists to clarify what precisely life insurance entails, when one ought to acquire it, and the crucial query—whether it truly holds value.

What is life insurance?

"Life insurance is a financial tool that provides your family or beloved ones with a monetary payout should you pass away during the coverage period," explains Ian Cooper, the commercial director and product specialist at SunLife.

Life insurance generally falls into two primary categories," according to Chris Ball, the managing director partner at independent financial advisory firm Hoxton Wealth. "These are term life insurance and whole-of-life insurance.

Term life insurance provides coverage over a set duration, such as 25 years," says Cooper. "If you pass away within the term specified in your policy, it will provide a payout—typically a substantial amount meant to cover significant debts like an unpaid mortgage. However, should you survive beyond the covered period, you won’t receive any return.

Whole-of-life coverage, also commonly referred to as 'over 50s' life insurance, is designed for individuals aged 50 and older. In essence, this policy provides protection throughout your entire lifetime—regardless of how long you may live. Since it guarantees payment upon death, the payouts tend to be lower compared to those from term insurance policies, usually intended to help with expenses such as unpaid debts or funeral arrangements.

One significant distinction between these two types is that not all individuals qualify for term insurance; typically, applicants must respond to medical inquiries to be approved. Conversely, most plans designed for those over 50 generally assure acceptance of anyone within this age bracket, irrespective of their health status.

At what point should individuals consider obtaining life insurance?

I would suggest doing it as quickly as you can," Ball states. "A lot of individuals might believe that life insurance is not relevant to them or that they do not require it.

“However the areas that a lot of people miss out with life insurance is things that could happen like total permanent disability for example – being in a car crash and not being able to work again. That’s the type of life insurance that we kick in at those points to cover you. I always advise clients to make sure that they seriously consider it and not just people with children or a spouse. It’s for people of all ages that need an income – which is pretty much everyone,” he says.

Cooper echoes this as he explains that while there is no fixed age at which you should take out life insurance, most people decide to when they get a mortgage or have children. “But it’s important to review your cover needs regularly, to ensure it’s covering what you need,” he says.

What advantages does purchasing life insurance offer?

Term life insurance and whole-of-life insurance both aim to assist your dear ones during an extremely tough period," Cooper explains. "It could be for settling the home loan, or ensuring they have extra money for unpaid bills or funeral expenses — it’s all about making sure you lessen their worries.

"Customers often mention that one of the primary advantages of obtaining a guaranteed over-50s insurance policy is the sense of security it provides. Since the payout is assured after one or two years, they can be confident that their family members will receive financial assistance when needed," he explains.

“Life insurance also offers you protection and stability,” Ball states.

Sure, building up wealth and putting money into ISAs or regular investment accounts and pensions is fantastic. However, imagine being unable to work for anywhere from six to twelve months due to something like a heart attack or a long-term illness. In such cases, individuals would likely deplete their savings unless they have also invested in life insurance.

“Ideally, this should be the largest unnecessary expense for you, yet it provides reassurance. Many individuals opt to insure their vehicles, smartphones, and houses; however, few choose to insurance themselves — despite being the most vital asset,” he states.

Is purchasing life insurance worthwhile?

"When asked this question, I recommend considering the potential financial support your loved ones might require should they pass away unexpectedly — an unsettling thought, I understand," explains Cooper.

For instance, if they had to deal with a £4,000 funeral expense, would they be able to cover it financially? If not, this might increase their stress during an already challenging period. Therefore, receiving a payout from a life insurance policy could make a significant difference. Should you already possess ample savings or have alternative funding arranged, then perhaps life insurance isn’t necessary. The choice ultimately lies with you. However, establishing a financial safeguard for those we care about can provide immense reassurance for all involved.