It may be a morbid topic, but at one time or another, we all have to face the question of how our funeral will be paid for. Traditionally, either you or your family will have some money set aside for this inevitable event.
But money is tight for many of us these days. And because we are all living longer there is the growing problem of the ‘pension gap’ – whereby pensions will simply not afford a reasonable standard of living in our later years.
This means many of us won’t have the money to cover our own funerals, which could put strain on your family’s finances.
Can life insurance protect your family when you’re gone?
Many people turn to life insurance to protect their family against financial hardship when they pass away. In short, life insurance can offer a significant payout upon your death. This can be a real help – and a comfort – for your loved ones.
But it’s important that you arrange your life insurance as early as possible. Life insurance gets more expensive the older you are, and if you leave it until you’re retired you may find it simply isn’t affordable.
It’s not just the price of church arrangements, catering, etc. The price of headstones can be quite high, as can coffins and the service itself. There’s a lot to consider that life insurance could cover.
Why choose life insurance instead of just saving?
In many cases, the payout from life insurance is much higher than you’d get from savings alone. For example, a policy costing just £10-15 a month could provide upwards of £50,000 payout if you die unexpectedly.
Life insurance doesn’t just cover funeral costs. It could help pay off any outstanding balance on your mortgage, or other debts in your name. Or it could simply help your family maintain a decent standard of living after you’ve gone.
Of course, it’s still a good idea to save as much as you can to supplement this income – not to mention the protection against other unexpected costs.
How much can life insurance realistically provide my family?
It depends on how much you pay each month, and what type of life insurance you choose.
As a general rule, the higher the monthly payment, the higher the potential payout. The earlier you start the better the payout, too.
Mortgage life insurance is designed to simply cover the outstanding balance on your mortgage. For a lot of people, this is enough to ensure the family can carry on in your absence. Those who wish to provide a more substantial payout may wish to take out a fixed-sum life insurance policy, which guarantees a certain amount of money.