Trust me when I say that I understand the importance of insurance as a parent. With 13 children relying on me, life insurance is a must. If anything were to happen to me, I want to know that my children will be looked after financially so they can continue living life as best they can.
Even with just one child, the premise still stands. Life insurance is not to be ignored! If you’ve been putting it off for months because you can’t find the time to make that phone call or do that online quote comparison, let this post be the push you need to get it sorted.
Why do I need life insurance?
It goes without saying that children need a lot of care and attention, so a regular steady income is pretty vital. There’s a lot of costs that need covering in a family home and if anything were to happen to you, a life insurance payout can really help. Plus, if there was ever a time to realise that anything can happen and no one is invincible, it’s the year 2020, right?
Think about it; could your family still pay the rent or mortgage without you and your earnings around? That’s the roof over their heads, so probably the biggest and most important costs. The last thing your family is going to want to handle alongside dealing with a death is potentially losing their home because they can’t cover the payments. When taking out a life insurance policy, you can ensure that your payout will be enough to cover the mortgage/rent repayments, or even to pay the entire mortgage off.
Secondly, if you have debts such as loans and credit card bills to leave behind, your family will also be left to pay those. These debts do not just disappear when someone passes away. It’s a good idea to factor this into your life insurance payout too, so that no one has to worry about these costs when you’re no longer around.
Joint or single policy?
Although taking out a life insurance is a pretty straightforward process, there are a few things to consider and a few decisions to be made. Firstly, if you’re in a couple with children, would you prefer a joint or a single policy? Or perhaps two single policies? There’s a few pros and cons to both. A joint policy works out cheaper, however there can only ever be one payout and one claim. You’d like to think that one claim would be enough, but although it’s awful to think about, what if something were to happen to both you and your partner at once? A car accident for example. Will one payout be enough?
You may feel that it makes the most sense to simply insure the ‘main breadwinner’ in the family, as they have the majority of the income to protect. However, what if something were to happen to the carer in the family? The breadwinner may have to work less to be around more for the children, or continue to work but pay for childcare.
If you can justify the extra cost of two single policies, you’d sleep easy with the peace of double the protection.
Decreasing term vs level term
Secondly, you’ll need to decide on a decreasing term policy or a level term policy. Decreasing term policies are designed to cover a payment that decreases over time – such as your mortgage. Over time your monthly costs will fall, but then so does your payout as a result. For this reason, decreasing term policies are slightly cheaper but they are perfect if paying off the mortgage or debts is a priority. If you want to cover off a lot of costs and provide your family with a chunk of money upon your death, you may want to instead consider a level term policy.
A level term policy pays the same agreed amount and lasts for the length of time you choose. If you know your family is going to need financial support for the next 18 years, then you’d take out a policy that lasts 18 years. It’ll payout enough to cover the necessary costs and help your children get by until they can stand on their own two feet.
You should also think about life assurance, as opposed to life insurance. Whilst life insurance covers you for a fixed number of years, life assurance covers you for the whole of your life. That means you’re always guaranteed a payout at some point, which is great but it will cost you a little more than other options in the long run.
As a parent, all you want to do is protect your children. Life insurance is all about protecting your children when you’re no longer able to be physically there for them. It’s setting them up and giving them the best chance, regardless of what happens to you.