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Category: Insurance Date: 9/30/2011
Is your life insured? If not, why not? Is it that you haven't got round to it or haven't thought of it?
Maybe you don't believe in insuring your life – perhaps you think it's a waste of money.
Whatever your reason for not having life insurance the fact remains that death could be round the corner for any of us. Whilst you might 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:
1. You don't know when you're going to die!If we were blessed with foresight, financially planning for death would be so much easier wouldn't it? If we knew, like in the science fiction film Logan's Run that life would end on a set date, we could put things in place accordingly. But we don't know – you simply might not have enough time to put an adequate pot together.
2. You may not physically be able to save enoughHow much would your loved ones need to help maintain their lifestyle if you weren't around? You'd probably need the mortgage payments made for a time, or the mortgage paid off completely. You might also need to save enough to provide an income to cover your family's outgoings for a while – until your children all reach the age of 18, for example.
Now 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 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 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: you don't need it.You might live by yourself, with no dependents, with enough in the bank to cover your funeral costs.You might have paid off your mortgage and your spouse or partner is capable of living comfortably without your income – again you would have enough in your bank to cover the costs of your funeral, and no financial dependents.But for a lot of people, there is a 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 you live in a more remote location, etc.).Now life insurance works slightly differently; of course, it's not designed to replace the person, nothing can do that. However, 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.
With life insurance, you will never physically see the benefit of your policy. It's a type of insurance designed to help others: the people you care about.
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: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at anytime.