The top 5 benefits of life insurance

The benefits of life insurance are multiple. From ensuring your children’s education is taken care of to covering your mortgage, life cover brings the comfort of knowing that your loved ones will be looked after no matter what happens.

Life insurance is an agreement between you and an insurance provider: you pay premiums now and, in exchange, your beneficiaries receive a sum of money when you pass away. Taking the financial strain out of death can be a great gift to leave to those you love.

We’re going to take you through why putting a life insurance policy in place is a good idea, as well as the top benefits of making this financial decision.

What are the advantages of having life insurance?

The most significant of the advantages of life insurance is the peace of mind that your loved ones will have some financial protection when you’re gone. Dealing with debt and unforeseen payments when you’re grieving can be an enormous strain on top of an already difficult time. Life cover can relieve a great deal of this burden. 

While taking out a life insurance policy can be valuable at any stage, there are some pivotal moments in life when the decision is even more critical. If you have a new baby on the way, you may want to take out life insurance to ensure that their needs are cared for, no matter what happens. Another time when it is helpful to get life cover is when you take out a mortgage or a big loan.

There are two main types of life cover, permanent and term, each with their own benefits. 

The benefits of permanent cover 

Also referred to as life assurance, permanent cover is a type of life insurance that pays your beneficiaries out no matter when you die. 

It can be used as part of your inheritance tax planning, as it is not subject to capital gains or income tax in the UK. It also means that your family will likely receive a faster payout and more control over their finances than they would with other kinds of inheritance. This kind of cover can also be investment-linked, meaning that you can use it to grow your money. 

For all the perks of permanent cover however, there are some downsides. Because it offers a guaranteed payout at any time of life, it’s more expensive. It can also be less flexible than other kinds of life insurance.

The benefits of term life insurance 

Term life insurance offers cover for a period of time agreed upon beforehand with your provider. Your policy will pay out if you pass away within the specified term. It’s ideal for covering specific expenses such as mortgage repayments or car loans, or providing financial support to your family to cover monthly bills. 

Term life insurance is more affordable than whole of life cover. But you’re not always protected. If you die outside of the term of your life insurance, your beneficiaries will not receive a payout at all. With this in mind, when your policy expires, you do have the opportunity to review your current financial situation and see what kind of cover you would like to opt for next.

For more on how life insurance works, head here.

What are the 5 benefits of insurance?

Life insurance benefits range from helping your family meet their financial needs to paying off specific debts. Here are some of the main benefits you can look forward to.

1. Provide financial support for your loved ones

We’ve put this benefit at number one! Whether you opt for permanent or term life cover, your beneficiaries will receive financial support according to the terms of your policy, provided you have stuck to your end of the bargain by paying your premiums. Depending on your agreement with your insurance provider, benefits can either come in the form of a lump sum or monthly payments. 

Taking out life insurance is particularly important if you are growing your family. It’s also important to note that your children’s financial needs may increase with age. A type of insurance called increasing life insurance, whereby you can increase your cover over time, can help you mitigate the effects of inflation and cover the growing financial needs of your family.

2. Pay off your mortgage

If you’ve just taken out a mortgage, life insurance is a good next stop. While it’s not mandatory, mortgage life insurance will ensure your mortgage is covered if anything happens to you. 

Mortgage protection is typically decreasing life cover, meaning that the amount your beneficiaries are paid out upon your death decreases with time. That’s because, if you are keeping up with your payments, the amount you owe on your mortgage should go down as the years go on, so the amount your beneficiaries will need to pay it off will go down, too. 

3. Cover your debts

You have the option of taking out a life insurance policy specifically purposed for a particular debt (like a car payment or credit card debt). This is called credit life insurance and will pay off your debt if you die before you are able to pay the owed amount in full.

Having debts paid off can really help relieve the financial pressures of navigating your estate. 

4. Pay for your funeral

Taking care of your own funeral expenses can be a real gift to your family. Having to deal with the sometimes unforeseen costs that come with death can be very stressful for those who are mourning. 

Funeral cover can either be added on to another policy or be taken out as a standalone plan. It can also either be paid for up front or in the form of monthly premiums. 

Depending on what you arrange with your provider, your insurance can either cover the cost of your funeral only, or other expenses, such as a burial plot. 

5. Help you save for your family’s future

If you don’t have a lot of savings, life insurance policies can be a great way to ensure that your family has enough if anything should happen to you. Paying your premiums is a simple, organised way to ensure that your nearest and dearest are taken care of when you’re no longer around. 

Life insurance policies can also form a crucial part of your inheritance tax planning. By putting your policy in trust, it’s possible to keep it separate from the rest of your estate. This not only leads to faster payouts but also limits how much inheritance tax needs to be paid. As a result, your loved ones may be able to skip inheritance tax entirely, or the amount they pay will be severely reduced. 

Choosing the right life insurance policy

As you may have guessed, life insurance comes in all shapes and sizes. The good news is, unlike other forms of insurance, it’s possible to have more than one life insurance policy at a time.

Once you’ve assessed your specific needs, get in touch. We’ll be able to walk you through the various options to find the perfect match for you and your family.

In summary

The greatest advantage of life insurance is that you get to take care of your loved ones, even when you’re no longer around. The peace of mind that your nearest and dearest won’t be put under financial strain if you pass away is priceless.

The key benefits of life insurance include:

Providing financial support for loved ones, either in the form of a lump sum or monthly payments.

Paying off a mortgage, so that your family is not put under the strain of having to meet your regular payments without you.

Covering your debts, including car payments and credit card debts.

Paying for your funeral, so that your loved ones aren’t put under extra financial strain when they’re grieving.

Helping to save for your family’s future, particularly if you don’t have a lot of savings in the bank. 

While the benefits are obvious, it can be tricky to know where to start when it comes to taking out life insurance. That’s where we come in. Howden is a specialist insurance broker that will help you find the right coverage for the very specific needs of your family. We’d love to chat.

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