Whatever your thoughts are on life insurance, the fact remains that death could be just around the corner for any of us. While you may not agree with the principle (or the price) of life insurance, it does provide a real solution to the biggest financial risk to your family.
There is an alternative to life insurance. You could save or make investments, specifically to provide a nest egg for your loved ones if the worst should happen.
However, there are a couple of big problems with this option:
In order to achieve this pot you'd need to save tens, if not hundreds of thousands of pounds – that's probably beyond what most of us could achieve. And if you could, saving it would probably have a much greater impact on your lifestyle than the monthly premium of a life insurance policy!
However, there is one specific advantage with this option over a term life insurance policy – namely that if you don't die in the term of the policy (or cancel the policy before you do), you have a nice big nest egg saved to use as you wish, in contrast to premiums that you would never see again.
There aren't really any good reasons not to have life insurance, other than this one: if you don't need it. You might live by yourself, with no dependents, with enough in the bank to cover your funeral costs. Alternatively, you might have paid off the mortgage and your spouse or partner is capable of living comfortably without your income – again, you might have enough in your bank to cover the costs of your funeral, without having any financial dependents. But for people with different lifestyles and families who depend on them, there is a clear need for life insurance.
Most people accept the fact that car insurance is the most effective way of covering against the many risks of motoring. If you drive a car you have to have at least third party car insurance, but a lot of people have fully comprehensive cover. That's because if your car is written off, the cost to replace it will be high – you may not be able to take that kind of hit on your savings. You need your transport for work, or for a number of different reasons (the school run or if you live in a more remote location, etc.). Life insurance may work slightly differently, but the principle is the same. It's not designed to replace the person, but it is designed to replace income, or reduce the financial impact of a person's death – an event that is much more far-reaching than the loss of a car, or a few possessions.
It could simply mean that your family aren't faced with the financial strain of having to cobble together funds to give you a good send-off. It could even mean the difference between your family facing repossession proceedings at the same time as dealing with their bereavement.
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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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