Without this, you'll be broke in 14 days

Fail to get this and your loved ones could wake up one morning and find they are totally broke.

I know it’s not something anybody likes to talk about, but at some point all of us are going to die. Having been through a few family health emergencies myself this year already, my own mortality has never been clearer.

As with almost anything else you’d care to think of, death is inextricably linked to money. You need to think about a will, to ensure your assets go to exactly who you want to get them. You need to worry about Inheritance Tax, to work out just how much the State will be siphoning off (and keep it as low as possible).

And you need to think about life insurance...

Broke within a fortnight

The scary thing is that without this vital insurance, many of us would be in serious bother in a matter of days should the worst happen.

Research by Aviva last month found that the average British household would only have enough money to cover the bills for just a fortnight should either partner fall critically ill or die.

Without further borrowing, that comes to £914 for the average home.  One in four Brits would only be able to get their hands on a paltry £100 of disposable income – a terrifying statistic.

And the principal reason so many people would be completely broke is because they have turned their back on protection – nearly two-thirds have no life insurance or critical illness cover.

Not for everyone

Of course, life insurance is not actually necessary for everyone. If you have no financial dependents – in other words, anyone who would lose out financially if you weren’t around – then life insurance is not needed. Instead you should look at critical illness insurance or income protection.

However, if you have a partner, or kids, to ignore life insurance is plain reckless. They rely on your income, and should you pop your clogs unexpectedly without taking out a decent policy, they will be seriously shortchanged as a result.

Thankfully getting a policy up and running is pretty easy. All you need to do is check out the lovemoney.com life insurance service to help you find the cheapest quote - and away you go! Plus, if you take out a new life insurance policy with lovemoney.com by 7th April, we’ll give you £100 to say thank you.  Find out more 

Getting the right deal

However, it’s one thing to know you need life insurance – quite another to know what type of life insurance you need.

I remember when I first sorted out mine when I took out my mortgage, I was really thrown by some of the jargon involved. Thankfully I had a great broker to talk me through it, but I’ll try to demystify some of the main terms for you now.

Keeping things level

Related goal

Slash your insurance costs

If you’re feeling the pinch, these ways of saving money on your insurance will help.

Do this goal

The first option is level term assurance. As the name suggests, the amount of cover involved stays the same (or level) throughout the policy, and the policy will only pay out over a specified term.

Therefore the policy will pay out a lump sum of whatever amount you go for, should you die at any point over the selected term. So if you have a £150,000 policy on an 18-year term, and you pass away in year 17, that money will be winging its way to your family.

Unsurprisingly, the amount of cover you go for, and the length of the term will have an impact on the premiums you have to pay. The lower the cover, and the smaller the term, the cheaper the premiums will be.

Decreasing cover

A second option is decreasing term assurance. Yep, you guessed it, as with level term assurance you get paid a lump sum so long as you die within the set term, though the amount that is paid out decreases over time.

This form of life insurance is most popular with mortgagees. It is generally taken out to cover the cost of the mortgage, and as that decreases over time, so does the cover needed to pay it off.

Getting the right amount of cover

So now it’s up to you to decide whether you want that lump sum to just cover the mortgage, or to provide an extra financial buffer on top. While decreasing term assurance will remove the worry of meeting the mortgage costs for your family once you’re gone, they will still have to cope with living costs (food, clothing, etc) on their own.

Unsurprisingly, level term assurance tends to cost a bit more so bear that in mind.

If you are unsure of just how much cover you think you will need, lovemoney.com has a terrific cover calculator. Have a play around with a few different figures and you’ll soon have a good idea of just what you need.

The height/weight ratio

I had a brilliant conversation with my mortgage broker when he called me to say that the insurance quote had come in a bit higher than expected. As he put it, the insurer was concerned by my “height to weight ratio”.

So if, like me, you are carrying a bit of timber expect to pay a bit extra for your cover. Should you get yourself down the gym and lose a few pounds, the insurer may actually cut your premiums.

There’s a host of other personal factors that will impact how much you have to shell out, such as whether you smoke.

Time to get searching

By now you should have an idea of whether you need life insurance, what form you want to go for, how much cover you’ll need, and what other factors might play a role in determining the size of your premiums.

All you need to do now is find the right policy!

Luckily for you lovemoney.com has a terrific life insurance comparison engine which will help you find the right policy for you, and at the right price. It doesn’t take long, and by the time you’ve finished your family will be protected financially should the worst happen.

That has to be worth five minutes of your time.

More: What happens to your money after you die? | You really can afford private medical insurance