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Who Needs Life Insurance?

If someone will suffer financially when you die, the chances are that you need life insurance. Life insurance provides cash for your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet many important financial needs, such as, daily living expenses, funding for children's further education and funeral costs. What's more, there is no income tax on life insurance benefits. Most people need life insurance. To calculate what amount of life insurance you require, you need to think through the worst-case scenario: If you died tomorrow, how would your loved ones fare financially?

Would they have the money to pay for your final expenses (e.g., medical bills, debts, lawyers' fees, funeral costs etc.)? Would they be able to meet ongoing living expenses such as the rent or mortgage, food, clothing, transportation costs, healthcare, etc? What about long-range financial goals? Without your contribution to the household, would your surviving spouse be able to keep their standard of living, or save enough money to put the children through university, or retire comfortably?

The truth is, it's always a struggle when you lose someone you love. However, your emotional struggles don't need to be compounded by financial difficulties. Life insurance helps ensure that the people you care about will be provided for financially, even if you're not there to care for them yourself.

To help you understand how life insurance might apply to your particular situation, we've outlined a number of different scenarios below. So whether you're young or old, married or single, have children or don't, take a moment to consider how life insurance might fit into your financial plans.

You're married

When you're married, you share everything with your significant other, including your financial obligations. Many people mistakenly believe that they don't need to think about life insurance until they have children. Not true! What if one of you were to die tomorrow? Even with the surviving spouse's income, would that person be able to pay off debts such as credit card balances and car loans, let alone cover the monthly rent or mortgage payments and utility bills, and still keep their existing standard of living?

You're married and have children

Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain their standard of living on your spouse's income alone? Probably not. Life insurance makes sure that your plans for the future don't die if you do.

You're a single parent

As a single parent, you're the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance whatsoever, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, it's fundamental to ensure that you have enough life insurance to safeguard your children's financial future.

You're a stay-at-home parent

Just because you don't earn a salary doesn't mean you don't make a financial contribution to your family. Childcare, educating, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Conservative estimates of these services are over £20,000 per year. Could your spouse afford to pay someone to provide these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.

You have grown children

As the years go by, you may feel your need for life insurance has passed. However, just because your offspring have graduated from university and the mortgage is paid off, it doesn't necessarily mean that government pension and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. What if your spouse outlives you by 10, or even 30 years, which is certainly possible today? Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?

You're retired

Have you been a government employee and contracted out of WORPS? Have you purchased an annuity without a spouse's pension? Are you financially assisting any of your children or siblings? Any of these situations could leave your spouse, children or siblings without enough… Retirement without money is just no fun!

You're a small business owner

Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a 'buy-sell' agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, 'key person insurance,' payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangements at such a crucial time.

You're single

Most single people don't need life insurance because no one depends on them financially. However, there are exceptions. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn't want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you're single. If you're young, healthy and have a good family health history, your insurability is at its peak and you'll be rewarded with the best rates on life insurance. If you anticipate a need for life insurance down the road (e.g., you're the marrying type) and you can fit the premiums into your budget, it might make sense to lock in coverage while you're young and single.

Even more important is to make sure you have Critical Illness cover. This would eliminate the need to have to depend financially on the government or on family and/or friends should such a tragedy arise.

Feel free to contact Castiel Winser to discuss your options.