While you may not like to consider the prospect of passing away, it can be important to make preparations to ensure that your family are looked after when it happens. Having life insurance in place can give you invaluable peace of mind and provide a financial safety net for your loved ones.
According to a report published in Unbiased, the pandemic has prompted around three-fifths of Brits to think more about their financial stability. On top of this, one-sixth have also stated that they are more likely to consider taking out life insurance.
If the pandemic has raised your interest in seeking protection, but you aren’t sure if you need it, read on to find out if you’re one of the three types of people who need life insurance the most.
1. Couples with joint financial responsibilities
If you’re in a relationship, you may be used to doing your financial planning together with your partner. This makes a lot of sense, as it allows you to maximise your allowances and plan in a tax-efficient way.
However, if you were to pass away unexpectedly, this could cause serious financial issues for your partner.
If you have been together for a long time, then your partner may need to take some time to adjust to your loss as they work through their grief. During this time, they may run into financial issues, such as tax complications, if they haven’t factored in their reduced allowance as an individual.
For example, there is an annual allowance of £2,000 for how much you can earn from dividends in a given tax year. This means that a couple can earn £4,000 in that period, if they use up both of their allowances.
If your partner hasn’t had time to reassess their finances after your death, they may accidentally go over their annual limit. This could land them with a hefty tax bill to pay.
Furthermore, it’s likely that your partner will need to reconsider their financial life plans once you have passed away. This may include issues such as whether they will be able to continue paying their mortgage.
With strong growth in house prices in recent years, many young people can only afford to buy a home with the help of a partner. This obviously poses a significant problem if you were to pass away before repaying your mortgage.
According to a study by Legal & General, more than one-third of joint mortgage holders stated that if they passed away, their partner would be unlikely to be able to keep up with their repayments alone. If this happened to your partner, then they may lose their home.
Coping with the passing of a loved one is never easy, and the process of grieving can take many months. If you were to pass away unexpectedly, the last thing your loved ones would need is to have financial concerns on top of their emotional distress.
This is why you might want to consider taking out life insurance, as it can spare your partner the additional emotional strain of having to deal with financial troubles at a time that is already difficult enough for them.
2. Business owners
If your loved ones rely on the profit extracted from your business, have you ever wondered what would happen to them if you were to pass away suddenly? Without life insurance, they could experience serious financial hardship.
This is equally true if you and your partner run the business jointly, as your passing might cause a significant disruption to operations.
For a start, your partner would need time to mourn your loss, which might result in taking a significant amount of time off. Not only this, but once they return to work then the business may not be able to run as effectively as it did before, causing a potential loss of income.
Having life insurance in place can give you peace of mind to know that your loved ones have a financial cushion to help them to absorb the shock of your loss. Without this cushion, your passing may cause the collapse of the business and leave your family without a source of income.
Having protection also means that your loved ones won’t need to sell the business to get by if you pass away. This can be comforting if you’ve devoted a significant amount of time and effort to building it.
3. Parents
Having life insurance in place is particularly important when you have people who depend on you, which is why parents are another group who should consider life insurance. This is particularly true if you are the main or sole earner in your family.
If you passed away and your partner didn’t have enough income to support themselves and your children, then they may face a much lower quality of life than they are used to.
A knock-on effect of this would be that it could also have a serious impact on your children’s futures, as the financial difficulties may limit their possibilities in later life.
To ensure that your death doesn’t impact your loved ones’ futures, it’s important to seek the right kind of financial protection. This can allow you to rest easy knowing that your family wouldn’t have to suffer even if the worst were to happen.
Get in touch
If you want to protect yourself but aren’t sure which form of life insurance is right for you, get in touch. Email us at office@verve-financial.com or call 0330 320 5048.
