Is life insurance compulsory?
No, life insurance is not compulsory by law, but it can be a very important purchase if you have a mortgage, spouse and children that depend on your income. In fact, some mortgage providers will insist that you have life insurance [https://yulife-live.ghost.io/] in place when you are applying. Life insurance is set up to provide some financial reassurance for your family and loved ones in the event of your death. For your family that rely on your income, they can have peace of mind knowing that
Yugi the Giraffe - 2 June 2019
No, life insurance is not compulsory by law, but it can be a very important purchase if you have a mortgage, spouse and children that depend on your income. In fact, some mortgage providers will insist that you have life insurance in place when you are applying.
Life insurance is set up to provide some financial reassurance for your family and loved ones in the event of your death. For your family that rely on your income, they can have peace of mind knowing that they will receive a lump sum to pay for ongoing mortgage payments and other essential bills.
When do you need life insurance?
When you have a mortgage – Your mortgage is going to be the largest expense and asset that you owe and in the tragic event of your passing, your life insurance cover should be able to pay for your outstanding mortgage repayments.
This means that your loved ones are protected and do not have the risk of being uprooted or forced to move home, during a time that is already going to be very difficult and emotional. There are also terminal life insurance policies that will pay off your mortgage debts if you are still alive but diagnosed with a terminal illness.
You have children – When you have children, your life cover should be able to support them financially, including their home, childcare, food and school fees. Making sure that your children, especially young children, have sufficient funds to pay for basic necessities and education is a good reason to have life insurance in place.
A partner who relies on your income – If you are the sole or main breadwinner of the family, your life cover can continue to pay for their financial support, including mortgage, accommodation, household bills and other essentials.
To pay for your funeral – The cost of funeral is rapidly increasing and currently stands at around £12,000, and this may double in the next 10 years. Rather than leave this burden on your loved ones, life insurance policies will usually have provisions in place to part for part or all of your funeral expenses.
Who does not need life insurance?
There are a lot of good reasons for every person in the UK to have some sort of life insurance in place. However, there are some instances where life insurance may be less suited.
The elderly (some, not all) – For those aged 65+, perhaps with no children to support financially or mortgage to pay, and they have medical conditions, it may be more cost-effective to not have a life insurance policy in place. Whilst a pay-out may help out their spouse once they pass, they may not need this if they are financially secure. Equally, life insurance pay-outs are subject to inheritance tax, so it may not be worth pursuing and instead putting any money in a trust for your beneficiaries.
Single and no children – If you are single, with no children and no property, there is potentially nowhere for your pay-out to go once you die or any bills to cover. In which case, there may not be a need to have a life cover in place.
Your partner has a large income – If you are financially secure due to have a spouse with a very large income and any payments for your mortgage and children are covered, you may not require life insurance. However, it might be valuable for at least your spouse to have a good policy in place.
Those on state benefits – For those on government benefits and not receiving a regular income or any valuable assets, any life insurance cover would offer a very limited pay-out.
Very young people – For young people still dependent on their parents and not earning an income (e.g students), they may not benefit nor have an incentive to apply for life insurance – although their parents would certainly benefit from having some cover in place.
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Yugi is our YuLife mascot. Like all giraffes they've got a big heart – in fact the biggest heart of all land animals.