Why Do I Need Life Insurance?
If you have people who rely on you financially – like a partner, children, or even a joint mortgage – life insurance can help cover:
- Mortgage repayments
- Household bills and daily living costs
- Childcare or education costs
- Funeral expenses
In short, it’s about making sure your family can stay in the home you’ve worked so hard to secure.
How does life insurance work?
Generally, life insurance provides a lump sum payment that can be utilized to sustain your dependents’ standard of living or to settle a debt, such as a mortgage. You determine the coverage amount you desire (referred to as the sum assured) and the duration for which you want it (the term). If you pass away during this period, the benefit will be disbursed.
In broad terms, there are three primary types of coverage:
- Level: the coverage amount remains constant throughout the policy’s term.
- Decreasing: as indicated by the name, the coverage amount diminishes over time, commonly used to safeguard a repayment mortgage.
- Increasing: this type of coverage escalates over time, typically linked to inflation, ensuring that the benefit’s value is preserved in real terms over the years.
How much does life insurance cost?
The monthly premium for life insurance can be quite affordable; however, several factors can affect the price, including:
- the coverage amount you select and
- the duration of the policy
- the policy type,
- your age
- your health and lifestyle.
Generally, the younger and healthier you are, the lower the cost will be.
Do I need life insurance?
While life insurance is not mandatory, if you have someone who relies on you financially, it is advisable to consider obtaining a policy. Life insurance can be crucial for many individuals; essentially, as soon as there is someone in your life whom you wish to ensure is financially secure in your absence. It is always prudent to reassess your requirements when you reach a significant life milestone, such as: – Purchasing a property – Getting married – Having children.
Consider whether your loved ones could manage or maintain financial comfort in the event of your passing. If the answer is NO, then it is essential to evaluate your life insurance needs.
Some commonly asked questions about Life Insurance
Life insurance pays out a lump sum to your chosen beneficiaries if you die during the policy term.
It depends on your mortgage, debts, income, and how much support your family would need.
The two main types are term life insurance (cover for a set period) and whole-of-life (lasts your lifetime).
Yes, though premiums may vary. Specialist providers and brokers can help find suitable options.
If you have debts or want to help loved ones with funeral costs, it’s still worth considering.
Your cover may lapse if you don’t catch up – always contact your insurer if you’re struggling.
Some policies are flexible, allowing increases for life events like marriage or a new child.
Usually, yes – though large estates may be subject to inheritance tax. A trust can help mitigate this.
Often until your mortgage ends or your children become financially independent.
The payout goes to your nominated beneficiaries – you can specify this when you apply or via a trust.
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