Reasons to have life insurance
Thursday, 13 Dec 2007 09:26
Having life insurance is necessary to protect family or dependants in the event of death, to protect inheritance, or to cover illness.
Protection for families and dependants Aside from the grief suffered when someone dies is the struggle to maintain payment on mortgages, loans or day-to-day living costs. If a sudden death occurs, families and dependants of someone who has taken out a life insurance policy will receive a payment to help with the financial burdens. Most people need life insurance but it is considered an essential for people who have found their life partner and who have children.
Inheritance Many people take out life insurance to pay for potentially hefty inheritance tax bills when they die. By law, estates over a certain value in the UK are liable for inheritance tax. To ensure dependants are not saddled with paying the controversial tax from their own pocket, life insurance can be arranged so the sum insured does not form part of the estate, and therefore cannot be taxed. The proceeds of the policy can be used to pay any tax or to meet other day-to-day costs until money from the estate is released.
To cover illness Certain life insurance policies also cover against the risk of having very serious illnesses. If the policyholder develops an illness listed by their insurer – such as a heart attack or cancer – a lump sum or regular amount can be paid out to cover, for example, loss of income.
Covering Mortgage Payments Mortgage payments are among the biggest financial outgoings for many families. For that reason, having a life insurance policy which covers the payments in the event of death, accident, illness or unemployment, will ensure you or your family does not become homeless.
Funeral Expenses Many policies can provide cover for the costs of a funeral, which can be extremely expensive events. So by paying monthly premiums or by putting a lump-sum payment into your insurance plan, you can ensure your dependants do not have to bear this financial burden. Pre-paid funerals allow the insured to choose the type of funerals they want too.