How Vital Is Life Insurance?

How important is life insurance? Well, do you have a family that depends on you?

The other day I was going over my bank statements and encountered a figure I am very familiar with because I've been looking at it for 20 years. It's for the princely sum of £9.55. Ever since 1986, when my husband and I bought our first house together, we have been paying £9.55 a month to an insurance company to ensure that our ever-decreasing mortgage is paid off should one of us die.

The reason it's so cheap is because one of us has to actually die in order for the other to claim on the insurance policy. It wouldn't cover either of us if we were unable to work through accident or illness so it's a truly bog-standard form of life insurance -- the type that everyone should have if they have anyone in their lives who is financially dependent on them. Unfortunately, around one in 20 adults die while their children are still too young to fend for themselves.

The most basic form of life insurance is level term insurance which means you pay a flat monthly amount for a set period and, if you die during that period, the policy will pay out a pre-agreed amount. For the most part this will suit people who simply want to make sure that their partner and kids aren't suddenly left destitute ie: the mortgage is paid off and there's a pot of money to draw on until they can get back on their feet.

It's not a financial product that you can buy and then forget about either. Even if you already have life insurance, there are key times in your life when your life cover needs reviewing - when you get married, have a new baby or take out a larger mortgage, for example.

However, the provision that you and your partner make for dependants is only 'just in case'. As the years go by, the children grow up and you build up savings, your requirement for life insurance will diminish as they'll either be able to stand on their own two feet or your other half will have your personal wealth to fall back on rather than that of an insurance policy.

If you have no children or you do not have a partner who depends on you, then life insurance isn't something you need to bother with. But if anyone in your family would suffer financially without your income, then you need life insurance. I've said it before and I'll say it again, life cover is only not worth considering when you have no dependants at all.

So if you think you should take out life insurance for the first time, visit The Fool's insurance centre where you'll be able to get a quote that suits your circumstances. There's plenty more information on life insurance in the centre too.

> What You Need To Know About Life Insurance
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