7 Reasons Why You Should Invest in Life Insurance

Do you want to help ensure your family’s financial security and provide for their future? If so, buying life insurance could be a good option for you.

There’s no doubt that life insurance (in its various forms) may be a  wise thing to have, however, whether life insurance could be considered a smart investment depends on what kind of policy you choose, based on what suits your individual circumstances.

Here are 7 reasons why you should buy life insurance today...

1. It provides Financial Security for your family

Life insurance can provide financial security for your family or loved ones in the event of your death. It helps ensure that they will have the money they need to help cover financial commitments, such as funeral costs, household bills and childcare cover.

It can also provide a large death benefit that could be used to help pay off debts, like a mortgage mortgage life insurance policy is designed for. The payout could also be used to help your family maintain their current standard of living and help ensure their financial security.

2. It’s more affordable than you may think

Many people can be put off buying life insurance, as they believe it can be costly. But in many cases, life insurance can be surprisingly affordable, especially when you consider the peace of mind it provides. 

However, there are several factors that can impact the cost of your monthly premiums. They include:

• Age - Younger people typically pay lower premiums than older people.
   
• Health - People in good health often pay lower premiums than those with pre-existing conditions.
   
• Type of cover - Term life insurance is typically more affordable than whole life insurance.
   
• Policy term - The length of your policy will also affect the cost of your premiums.
   
• Chosen provider - Different life insurance providers offer different rates, so it pays to shop around.

For more information about saving money on life insurance - read our guide on cheap life insurance.

3. It can protect your home

When it comes to buying a new home, life insurance is an important consideration. It provides peace of mind if something were to happen to you before your mortgage is repaid. For example, if you were to die before it's repaid, the responsibility could fall to your dependents, in which they may be forced to sell their home.

Decreasing term life insurance is a popular cover choice for protecting a mortgage, as it decreases in line with the amount of debt you owe. This means if you die before the mortgage is repaid, your loved ones should receive enough money to help cover the remaining debt. The premiums for this type of cover are fixed, but are generally cheaper than level term life insurance.

4. It helps with funeral costs

Funerals can be expensive, and if you don’t have a life insurance policy in place, your family may struggle to cover the costs. A life insurance policy is a good way to ensure that your loved ones are taken care of after you’re gone. It can provide them with the funds they need to give you a dignified sendoff.

A whole life insurance policy covers you for your entire life, so your family will receive the money they need to help cover funeral costs. This is often seen as the best type of life insurance for covering you for the long term, since it gives you a guaranteed payout.

In addition to this, whole life insurance is also a good option if you have an inheritance tax liability, or would like to leave money to your loved ones.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit.

6. It can be bought as a joint policy

If you have a joint asset, like a joint mortgage or dependents, you could buy joint life insurance. This type of cover is a popular choice for couples, as it can protect two people in a single policy. It can also be cheaper than buying separate policies.

There are two types of joint life cover - first death and second death. With first death, the policy pays out after the first death in the couple. The surviving policyholder then has enough money to help cover expenses, such as a mortgage or, to support them with their monthly income.

Second death pays out once both policyholders have died. The money can then be paid out to their dependents to act as an inheritance, helping them with their future.

7. It can be tax free

Whilst life insurance is generally considered tax-free, your policy is still considered as part of your estate if it were to payout. It could be liable to inheritance tax.

As long as the value of your estate is below the government threshold (£325,000), the payout will likely be tax-free. Your family could use the money from your policy to pay for future expenses, without having to worry about paying taxes on it.

Should the value of estate exceed the government threshold, you can write your policy in trust. This way your policy belongs to the trust and not your estate, meaning the eventual payout will avoid tax, and could even be used to pay the inheritance tax on your estate to free up your assets.

Don't leave anything to chance. Apply for cover today.

If you're ready to buy life insurance, why not apply through Cavendish Online? We offer 3 convenient routes to apply for cover, helping you to make the right choice when choosing a policy. If you require further support, speak to an expert life insurance adviser. They can help you choose a policy that meets your circumstances and budget.

What type of policy should I buy?

There are several types of life insurance policies on the market, but they generally fall into two categories: ‘term’ life insurance and ‘whole-of-life’ insurance. 

‘Term’ insurance is a less expensive form of life insurance as you may outlive the policy, as opposed to ‘whole-of-life’ insurance which is more expensive as the insurer will eventually have to pay out at the time of your death (so long as you keep paying your premiums). 

Term insurance as an investment

The main benefit of having term insurance is that it offers your family protection by covering flat costs, such as the loss of your income if you were to die during the term of the policy.

So, you could think of term life insurance as an investment, in the sense that if you were to die, your loved ones will receive a relatively large payout when you consider the relatively little you may have actually spent in terms of a monthly premium.

Whether you consider peace of mind as an investment also entirely depends on your outlook. It’s worth remembering that should you outlive a term based policy and not make a claim, there is no financial gain.

Whole-of-life insurance as an investment

A main benefit of whole life insurance is that it can help your family deal with bills associated with inheritance tax when you die.

It could help avoid this by paying out the funds required to clear the inheritance tax bill - without your family needing to take out a loan or go into their own savings to cover it. Keep in mind though, this is reliant on the policy being written in trust.

TIP: Whole-of-life insurance is also known as life assurance by many insurers.

Whole life cover may also appeal if you are determined to leave some form of inheritance to your family, or if you want to help with your funeral costs. Once again, whether you consider peace of mind as an investment is entirely subjective.

Don't leave anything to chance. Apply for cover today.

If you consider looking after your family when you’re no longer around as something that’s important to you, life insurance in its various forms should always be considered as a smart investment.

If you're ready to buy life insurance, why not apply through Cavendish Online? We offer 3 convenient routes to apply for cover, helping you to make the right choice when choosing a policy. If you require further support, speak to an expert life insurance adviser. They can help you choose a policy that meets your circumstances and budget.