Life insurance

There are many reasons why taking out a life insurance policy makes sound financial sense, not least because of the peace of mind you’ll have if the worst was to happen. If you take the right steps to protect your loved ones and your assets now, you’ll save your family and people who might be affected by your death or illness considerable stress.

If you’re not sure why taking out a life insurance policy is for you, here are the top four reasons why you should be thinking about doing just that.

1. You have children

If you have children, whether they’re still at school or college or have flown the nest, they’ll have their own set of financial needs that you’ll want to plan for if the worst was to happen to you. A life insurance policy will give you peace of mind that your family’s financial future is protected, whether that means covering the essentials after the loss of your income, paying for their education or providing a monetary gift to use as they like.

2. You want to cover the cost of your funeral

Nobody wants to think about how they’ll pay for their own funeral, but if not now, when? The cost of a funeral has become more and more expensive – according to a 2022 SunLife report, the average cost of dying is £8,864, with a basic funeral costing £4,056. If you take out a life insurance policy, you can use it to cover the cost of your funeral and remove the financial burden from your family during what’s likely to be a distressing time.

3. You have a mortgage on your home

If you have an outstanding mortgage on your home, how will you cover the outstanding repayments if you become seriously ill and can’t work or pass away? If you have a partner, will their income be enough to cover them? A life insurance policy and critical illness protection will pay out a lump sum and enable you or your dependants to pay off your mortgage balance if things take a big turn for the worse.

4. You want to cover your inheritance tax burden

Depending on the value of your assets when you die, Inheritance Tax (IHT) is the tax your family will have to pay. If your assets amount to more than £325,000, your estate will be liable for the standard IHT rate, which in 2022/23 is 40%.

You can take steps to reduce your loved ones’ IHT liability by, for example, leaving everything over the £325,000 threshold to your spouse, civil partner or charity.

However, if you take out a life insurance policy, you can cover your IHT bill with a lump sum payment and save your family the stress of having to find a way to fund it.