Until recently I thought the purpose of life insurance was predominately to cover a mortgage if you were no longer around to meet the repayments.
So, not owning a property myself, I never really saw the need for such cover.
But recently I was chatting with a good friend who pointed out that my partner works full-time and without his income, (or mine for that matter), we would not be able to support our young son.
Life insurance is paid for on a monthly basis and covers you for a set amount (or sum assured). If you were to pass during the policy term, your partner would receive a pre-determined pay out amount.
These funds, typically around 150k to 250k, could one day be an absolute god send.
So, we began looking into our options, and not fully understanding the product we came across a broker called Reassured, to help us with the process.
Covering childcare costs
If either my partner or I were no longer around, it would leave the other having to cover the additional childcare cost.
According to Money Advice Service full-time childcare currently costs on average £232.84 a week! With Cheeky Chap in school we wouldn’t have that much to pay all of the time but with schools having 13 weeks of holidays a year, that’s still a lot of childcare to fund.
As the husband works in hospitality, he’d likely have to reduce his working hours or change his job entirely.
Either way, there would be a loss of income either through reduced hours or increased childcare bills.
Having in place adequate life insurance would mean that we could cover this cost should the worst happen to either of us.
Cover daily living costs
Equally, if either me or my partner were to pass away the question of how we would cover daily living costs comes into question.
Surviving on one salary alone would be extremely tough, not to mention if that wage was mine seeing as I only work part-time and I am not well enough to work full time.
A life insurance pay out would be able to cover this shortfall and help our family maintain our existing lifestyle in a one parent family.
Pay for monthly rent
The biggest reason for not taking out life insurance until now was because we didn’t own a mortgage.
But upon reflection, it was highlighted that even if either my partner or I were to pass away, monthly rent would still need to be covered.
Unfortunately, this monthly expense would be difficult to meet in these circumstances which could result in us being forced to move.
At an already stressful time, this would be an awful strain.
A life insurance pay out would be able to cover this outgoing to allow the remainder of the household income to focus on maintaining our families existing lifestyle.
Cover funeral costs
A huge thing I had overlooked with regards life insurance was the cost of a funeral.
I had no idea that the average cost of a funeral in the UK had risen by 122% over the past 10 years and is now around £4,000, (without additional legal fees and ceremony costs).
If my partner or I were to die, we simply wouldn’t have the money to be able to cover these covers.
We would be required to borrow the funds from loved ones or take out a loan.
Life insurance could help avoid this and supply the necessary funds required to pay for the entire ceremony.
Life insurance is more affordable than you may think
To ensure minimal financial disruption to our loved ones should my partner or I sadly pass away, life cover is essential.
But as a family we, like many families, have limited disposable income and poses the question of how we would be able to afford cover?
It turns out life insurance is available from as little as 20p-per-day and there are several actions you can take to keep costs to a minimum.
Insurers charge more on a monthly basis if they believe you are more likely to make a claim.
For this reason, it is best to take out life insurance as young as possible.
Not only are you less of the way through the average life expectancy but you are also less likely to have experienced any serious medical conditions.
It is also extremely important to shop around and compare quotes. Insurers charge very different rates for the same level of cover.
Therefore, it is important to get quotes from numerous different insurers to find the most suitable policy at the best possible price.
I found using a broker was great as they not only compared a range of insurers on my behalf, but they were also able to explain all of the jargon to ensure I understood everything. (And there was no fee involved).
Alternatively, you could use a price comparison website to help you obtain multiple quotes, but this may be slightly more difficult depending on your understanding of the terminology and process.
Moral of the story is, even without a mortgage, life insurance can be essential to support your family in the worst-case scenario.
No one ever thinks they are going to need life insurance, especially when you are young.
However, having this protection in place may one day be one of the most important things you ever do.
Disclosure: This is a collaborative post.