Here’s Why Life Insurance Matters
It’s never easy to think about the future without you in it. But asking what would happen if you weren’t here is one of the most important financial questions you can ask. Life insurance can give you peace of mind that, should the worst happen, your loved ones won’t be left struggling.
What is life insurance?
Put simply, life insurance pays a tax-free cash sum to your chosen beneficiaries if you die during the policy term. Some policies also include terminal illness cover, paying out if you’re diagnosed with a condition that leaves you with less than 12 months to live.
Life insurance often becomes particularly relevant at key moments in life, such as buying a home, getting married or starting a family. If you have financial commitments and people who depend on you, it’s worth considering how they’d manage without your income. For young couples with a mortgage, for instance, one partner may not be able to keep up with the payments on their own. Life insurance isn’t just for those with children. It can also help cover funeral costs, settle debts, or even leave a legacy for friends or family.
What types of life insurance are available?
There are two main types of life insurance. Whole-of-life cover pays out whenever you die, but premiums tend to be higher. Term insurance runs for a set number of years, say, until your children reach adulthood or your mortgage is cleared, and only pays out if you die during that period. Because many people outlive the term, term insurance premiums are generally lower.
How much life cover will you need?
Think about your mortgage, regular expenses, childcare costs, outstanding debts and anything else your income supports. If your policy is to cover a repayment mortgage, a decreasing term policy, where the pay-out gets smaller as your outstanding mortgage shrinks, can be a more cost-effective option.
When should cover start?
Life insurance policies are available from age 18, with many providers capping the upper age limit at around 80. The younger and healthier you are, the cheaper your premiums tend to be, so it often pays to take out a policy when you’re in good health.
It’s also important to be honest when you apply. Failing to disclose medical conditions, or lifestyle factors like smoking, could result in a claim being rejected later. While the vast majority of life insurance claims are paid, being upfront means you’re fully protected.
It begins with a conversation
Talking about life insurance may feel daunting, but it’s really about giving you and your family some certainty in uncertain times. It’s a way of financially protecting those you care about most, even if you’re no longer around to do it in person.
As with all insurance policies, conditions and exclusions will apply