When Should I buy Life Insurance?

If we’re being honest, most of us will go to great lengths to avoid thinking about death or what will happen to our loved ones after we die. However, failing to prepare for this inevitability could have real financial consequences for your loved ones and in order to protect them, getting life insurance in place is vital.

Depending on where you are in life, the extent to which your family relies on you financially and the future needs of your loved ones, your life insurance requirements can vary greatly.

Do I need life insurance?

Life insurance is designed to offer a lump sum payment to your dependents in the event of your death. With this in mind, whether you require life insurance or not will depend largely on your individual family circumstances.

In general, if you have a partner, children or any other family members who depend on your income to cover part or all of their living expenses then it makes sense to have life cover in place. However, even if you’re not the sole or main income provider for your family, it may be beneficial to have a life insurance policy in place as your family’s financial circumstances could still be affected by your death. For example, if you are a stay-at-home parent and you were to pass away prematurely, your partner could be left having to quit work to take care of your children or pay additional childcare costs.

If you have no financial dependents, having life insurance in place may be less important but can still be worth considering as the lump sum payment could be used by your family to cover funeral expenses or pay off any outstanding loans you have.

Who can life insurance cover?

Depending on whether you are purchasing life insurance solely for yourself or for you and a partner, there are several options to choose from.

Single Life Cover: With this policy one person is covered in the event of their death during the policy term, for example for 20 years. If the person named on the policy (usually the main income provider) passes away within this timeframe, the lump sum payment from the policy will go directly to the policyholder’s estate/dependents.

Joint Life Cover: This type of life insurance is taken out to cover two people, and is payable on the first valid claim only. For example, if you take out a Joint Life policy for you and your spouse, a lump sum payment will be issued should either of you pass away during the policy term, but after the death of one of the policy-holders the cover will automatically cease.

Dual Life Cover: a type of insurance which covers two people but with the added benefit that a payment is possible on both lives. As this cover will continue after the death of the first policy holder (unlike Joint Life Cover which ceases on the first death), it is a very valuable form of protection where children are financially dependant of their parents.

When should I buy life insurance

Most people will opt to buy life insurance when they either start having children or begin to consider the possibility of doing so. However, there are some other stages in life where you may want to consider getting cover in place, such as when you get married, when you purchase your first home, or if you are taking out a substantial loan which your family would have to cover in the event of your death.

More generally, arranging life insurance while you’re in your 20s or 30s and in good health can be financially advantageous. If purchasing cover when young and healthy, you will likely be classed as a low-risk by your insurer and pay lower premiums as a result.

Similarly, if you purchase Convertible Term Life Insurance while young, you’ll be able to convert your policy to a new policy at any stage during the original term without having to provide new health information. (Check out our blog explaining what Life Insurance is all about for more on this benefit.)

What if I already have life insurance?

If you already have life insurance in place then, firstly, take a moment to clap yourself on the back for being prepared. However, it’s important that you don’t just forget about the policy after you buy it, and instead set some time aside at regular intervals to review your cover and ensure it still fits your needs.

For example, if you first purchased cover when you had one child but now have several children, you may need to increase your level of cover to ensure there’s enough money to cover the needs of all your dependents in the event of your death.

As well as this, it can be worth shopping around and comparing life insurance options to fit your needs every few years to ensure you’re not overpaying for the level of cover you have in place.

In the market for life cover? With AA Life Insurance you can get a quick quote online in under a minute.