Your Money Or Your Life Assurance

Fiona Nicolson looks at why many of us should take out life insurance.

Few of us want to spend their hard earned cash on more life insurance.But not having enough (or even worse, none at all) could be a big problem for you and your family if things go wrong. Recent research by Bright Grey, the protection specialist arm of the Royal London Group*, has uncovered the shocking fact that one in three families in the UK don't have any life assurance, critical illness or income protection cover, either. If your family is one of those doing without, here are some of the implications.First of all, consider what could happen if you have a mortgage and a family, but no life cover and you die, suddenly and unexpectedly. How would your partner and children cope financially?To give you an idea of how traumatic it could be, here's a true story told to me by a mortgage advisor. A young couple with a baby buy a house, but decide not to take out any life assurance. The husband is the breadwinner, the wife has given up work to look after the baby. Probably lots on his mind, he crosses the road without looking where he's going and walks into the path of a bus. He doesn't survive the accident. The wife is left with a property she can't afford to pay for. It has to be sold, she's left with very little after the mortgage is repaid and she has to find somewhere else to live. As the mortgage advisor points out, for the sake of a few pounds a month towards life assurance, the mortgage could have been paid off, leaving her with a valuable asset. That would have made quite a difference to her situation.Bills, Bills, BillsEven if you do have life assurance to pay off your mortgage, that may not be enough. The partner left behind still has to pay for food, bills, clothing and everything else a family needs, perhaps for many years to come. Would they be able to cope, financially? If this scenario is ringing alarm bells for you, it could be worth reviewing your arrangements. And then there's the issue of illness. None of us wants to think about having a life threatening illness but would you be able to cope financially if you did become seriously ill?You have two options to deal with this problem.Firstly, you could take out critical illness cover which pays out a lump sum if you become ill with one of a list of serious conditions. Or you could take out Income protection cover which will give you a regular tax-free income if you become ill or unemployed.You could also take out both types of policy if you want complete peace of mind.To put the odds into perspective, figures from one of the world's largest reinsurers, Munich Re, show that you have a one in four chance of getting a critical illness if you're male: one in five if you're female. So, it's not all that unlikely. The benefits of income protection, life assurance or critical illness may seem intangible when you could be spending the money on something far more enjoyable. But in the long-term, you might be glad of the choice you made.Take a look at how The Motley Fool Insurance Service could help you obtain the right policy for you.*Press release published on July 9th, 2007. http://www.headlinemoney.co.uk/RenderArticle.asp?nArticleID=40978&nImage=1The comments above are the opinions of the author only and do not represent advice specific to your circumstances.