This blog looks at what life insurance does, who needs it, and why most people who have it are glad they do.
Most people know they probably should have life insurance. However, many people still don't have it. That gap isn't usually down to ignorance. It's down to hesitation.
Every month, your premium goes out of your bank account. Nothing happens. It starts to feel like you've spent money on something you'll never use. And the longer nothing happens, the easier it becomes to convince yourself that it probably isn't necessary.
That scepticism is understandable. But it's worth reframing the question.
The issue isn't really whether life insurance costs money. It's what it would cost the people you love if you didn't have it. This blog looks at what life insurance does, who needs it, and why most people who have it are glad they do.
What life insurance is (and what it isn't)
Life insurance pays out a lump sum to your dependants if you die during the policy term.
It isn't an investment product. It isn't designed to grow in value or return more than you put in. Its purpose is to protect the people who depend on your income if you're no longer here.
The two main types are term insurance and whole of life. Term insurance covers you for a fixed period, say 25 years, and pays out if you die within that term. Whole of life cover runs indefinitely and guarantees a payout whenever you die, which makes it more expensive.
For most people, term insurance is adequate. It's designed to cover the period when your financial obligations, like your mortgage, dependent children or a partner who relies on your income, are at their highest.
The real cost of not having life insurance
Here's the scenario most people avoid thinking about.
You die unexpectedly. Your partner is left with a mortgage they can't cover on one income. They have children to look after, so can't increase their working hours. Their bills don't pause for bereavement. Their childcare costs don't disappear. And your family is now trying to grieve while simultaneously working out how to keep a roof over their heads.
Situations like this can happen to anyone when the main earner dies without life insurance. And the weight of it, the financial pressure layered on top of the loss, is what this type of cover exists to prevent.
A lump sum payout means your mortgage can be cleared. It means your partner has financial breathing space while they grieve. It means your children's lives aren't upended twice, once by the loss and again by the financial consequences of it.
Seen through that lens, life insurance isn't money going out of your bank account every month. It's protection you're providing for the people who matter most to you.
Why do so many people put it off?
Life insurance is one of those things that can sit on your mental to-do list for years. You know you should sort it, you just haven't got around to it yet. Here are a few of the most common reasons why people keep putting it off:
It's too expensive
For many people, the typical monthly cost of a straightforward term policy, particularly for younger people in good health, is lower than you might assume. More on that shortly.
I'm young and healthy, I don't need it yet
The longer you wait, the older you are when you take out a policy. And the older you are, the higher the premium. If your health changes in the meantime, that can push your costs up further or, in some cases, affect your ability to get cover at all. So, if you're young and in good health, it's the best time to take out life insurance, not a reason to delay it.
Nothing is going to happen to me
Probably not. But life insurance isn't about probability. It's about what the consequences would be if the unlikely did happen, and whether the people you love would be OK.
When does life insurance make the most sense?
There are certain times when the case for getting life insurance moves from being sensible to being essential. Taking on a mortgage is the most obvious one.
If you died tomorrow, could your spouse or partner keep up the repayments on their own?
If the answer's no, that's what life insurance is for.
Starting a family can also change your picture. A child, financially speaking, is a long-term dependant. If your income disappears, so does the financial foundation on which their life is built.
If you're employed, you may be eligible for death-in-service benefit through your employer, which would provide a payment to your dependants worth a multiple of your salary. If you're self-employed, there's no equivalent safety net. Your family would get nothing from your employer, because when you die, your employer dies, too.
Most people reading this will recognise at least one of these situations. That's usually a sign that getting life insurance is worth taking seriously.
What does life insurance cost?
Less than most people think is the honest answer, though what it costs you will depend on your age, your health, the level of cover you need and the length of your policy term.
A healthy person in their early thirties taking out a 25-year level term policy for a reasonable sum assured might pay somewhere in the region of £15 to £25 per month, equivalent to the cost of a streaming subscription, or a couple of takeaway coffees a week.
That figure will be different for different people. If you're older, you may need to pay more. If you have any pre-existing health conditions, it could affect your premiums. And higher levels of cover cost more. The only way to know what it would cost you is to get a proper quote based on your circumstances.
However, the gap between what people imagine life insurance costs and what it actually costs is, for many people, significant. It's one of the main reasons they never get around to sorting it.
Is life insurance ever not worth it?
Yes, and it's worth being straight about this. If you have no dependants, mortgage or significant debts, and enough savings to cover your financial affairs without anyone else being affected by your death, you might not need life insurance. But that's a fairly specific set of circumstances.
For anyone with a spouse or partner who relies on their income, children, a mortgage or financial dependants of any kind, the argument for having cover is hard to dismiss.
The aim here isn't to sell you something you don't need. It's to make sure the decision you make is an informed one, rather than one based on assumptions about cost or necessity that might not hold up when you look at them properly.
The bottom line
Life insurance isn't a waste of money. For most people, it's one of the most straightforward ways to make sure that the people who depend on them are protected if the worst happens.
The monthly cost is, for most people, modest. The alternative, leaving your family to manage financially without your income, carries a cost that no premium can really compare to.
If you're not sure what level of life insurance cover you need, what type of policy makes sense for your situation, or what it would cost, the next step is a conversation with one of our advisers, who can look at your full picture.
At FG & Cook, protection advice is part of how we work with every client. We'll help you understand what you need, compare your options across the market, and make sure the cover you end up with will do its job when it needs to.
Book a consultation today. A conversation costs nothing, and it could be worth more than you think.