Too young for life insurance? Think again…

Posted in: Finance Last updated: 04 Jul 2014

Most of us aren’t rushing out to buy life insurance until later in life, with a view that it is highly unlikely for us to die in the prime of our lives – and actually very little in the way of assets or dependents to worry about after were gone.  However, whilst it is somewhat of a taboo subject – death unfortunately is inevitable, so it is worth spending a little time pondering on what is important to you – so that if something unforeseen happens at any age, the things you care about are safe. Here we look at our typical path through life – and what the life insurance consideration might be...

Young adult

Ok – so life insurance isn’t a priority. Although you’re earning, there usually isn’t anyone relying on your income – so if you passed away it wouldn’t put anyone in hardship.  The premiums might be lower if you buy a policy while you’re still young and in good health; but some weigh this up against the value of saving and investing this money over the next few year.

However, if you’re caring for an elderly relative or child, or lucky enough to have clambered onto the property ladder already, it becomes a lot more important to make sure your mortgage is paid and your family looked after in the event of your death. Most people know that right? But had you considered what happens if you’ve taken out a joint loan with a relative or partner? Unlike some other personal debts – passing away whilst owning a joint loan will saddle the surviving payee with the whole amount – so life insurance might still be worth considering as it could help.

Getting married

As a young couple, if you’re earning roughly the same amount and contributing equally to household bills and rent, there’s still little need for life insurance. The tipping point comes when you become financially linked – via mortgage or joint loan as above. At this point, insurance would provide peace of mind that either partner could manage financially in the event of the death of the other.

Starting a family

Once you have young children, the need for life insurance becomes far more apparent; it’s crucial to ensure they’ll be looked after both emotionally and financially in the event of your death. Even in single income families it can be useful to insure both partners; as the death of a stay-at-home parent would incur domestic and childcare costs, or a drop in income for the working partner if they need to stay at home more often to support your children.

Winning a promotion

It’s always great to move up the corporate ladder, especially if that means an exciting new company to work for – or starting your own business. But amongst all the excitement, moving to a new employer is a key time to review your life insurance; many of us have cover as an employment perk, and this will end when you leave the company so make sure you review the level of cover you’re losing, and replace it if needed – either by opting into the scheme your new employer runs, or buying your own policy.

Suddenly single

No one likes to think they might someday get divorced, but if you do, amongst splitting up possessions you’ll also have to decide what to do with your life insurance policy. It can be quite simple to adjust your level of cover if appropriate, and change the beneficiary on your policy to your children, or another relative instead of your former spouse. However if you have a joint policy – and especially if your partner owns this policy – you might have to buy a whole new one – and this may come at a higher premium if the old one has been running for some time.

Time to retire

With grown up children, the mortgage and other debts; hopefully repaid, you might think you need less life insurance than you did in middle age. However, life insurance for over 50s and those in retirement is still common. And with life expectancy growing, and retirement pots being stretched, you might consider this to be a prudent measure to offset lost assets if you have to release equity in your home for example to supplement your income – or pay for long term care of yourself or a relative.  If you don’t have many savings or financial assets, the pay-out from a life insurance policy could be used to give your family a bit of inheritance.  Alternatively if you’ve already got that covered, it could go towards estate costs, pay for a funeral, or even leave a bit of a legacy by giving back to charity after your death.

Although life insurance seems like a purchase to make once you’re heading towards the end of your life, it’s actually something to think about at all ages – in fact whenever you’re going through a major life change. To make sure that you have given the topic due consideration – at each major change in your life, you should ask yourself “who depends on me?” and “what do I need to pay for?” The longer the answers to these questions, the more seriously you should be considering life insurance.

Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial advisor about your own circumstances.