Do I need life insurance?

What is life insurance?

Life insurance policies form a contractual agreement between you and an insurance company.

You pay regular premiums, and in return, the insurance company promises to provide a lump sum payment, known as a death benefit, to your designated beneficiaries upon your death. 

Understanding the basics of life insurance is crucial for making informed decisions about your financial future and ensuring your loved ones are protected financially, regardless of what happens.

It's about giving you peace of mind and knowing your family or dependents will be taken care of in your absence.

Who needs life insurance?

Many people grapple with the question, "Do I need life insurance?."

The truth is, there's no one-size-fits-all answer. as it all depends on your unique circumstances and aspirations for the future.

If you have people who rely on you financially, life insurance might warrant serious consideration.

Whether you're married, are pregnant, have children, provide support to elderly parents, or have substantial debts such as a mortgage or loans, a life insurance policy could serve as a crucial safety net for your family.

People engaged in high-risk professions or hobbies may be reassured to know that life insurance offers an additional layer of financial protection against unforeseen circumstances.

So, if you are asking yourself, “Why do I need life insurance?” the simple answer is it's about ensuring your loved ones are taken care of, even if you're not there to provide for them.

When might I not need life insurance?

While life insurance is important for many, there are situations where it may not be needed. 

For instance, if you're single and don't have dependents or significant financial commitments like a mortgage or debts, a life insurance policy might not be your priority right now.

Similarly, if you have substantial savings or investments that could support your loved ones adequately in the event of your passing, life insurance may not be as necessary. 

Is life insurance a legal requirement?

Contrary to popular belief, having a life insurance policy is not a legal requirement.

There is no law mandating that individuals must have life insurance, and you cannot be penalised for not having a policy.

That said, there are situations where having a life insurance policy is highly advisable. 

When applying for a mortgage, many lenders will request (and sometimes insist) that borrowers have life insurance before they release funds.

This is to safeguard their investment and ensure the mortgage can be repaid if the borrower dies unexpectedly. 

When obtaining a business loan, especially for a small business, lenders may require life insurance to ensure the loan can be repaid if the business owner dies.

Sometimes, lenders offering personal loans may also require life insurance as a condition of the loan agreement, particularly for larger amounts. 

What type of life insurance do I need?

If you’re wondering how to choose life insurance, there are various types of policies available, each tailored to different needs and circumstances. 

Term life insurance: Term life insurance offers coverage for a specific period, making it ideal for individuals with financial obligations for a set period, such as a mortgage or young dependents. 

Permanent life insurance: Permanent life insurance, such as whole life or universal life, provides lifelong coverage and may accrue cash value over time, making it suitable for those seeking long-term financial security or estate planning.

Specialised policies: These are life insurance policies that include dread diseases, critical illness, disability, or other specialised cover that offer additional protection by providing a lump sum payment upon diagnosis of specified medical conditions.

The type of life insurance you need depends on factors such as your age, health, financial goals, and budget.

Remember, the cost of your policy will be influenced by various factors, including the type and amount of coverage, your age, health status, and lifestyle habits.

Ultimately, the best life insurance policy for you will depend on your individual circumstances and financial goals.

Seek expert financial advice

A life insurance policy offers essential protection and peace of mind for you and your loved ones.

Whether you're starting a family, buying a home, or navigating significant life events, life insurance provides a vital safety net.

Understanding the basics of life insurance and exploring the different types available can help you make informed decisions to ensure your family's financial security. 

It's essential to carefully consider your options and consult with an insurance broker for expert financial advice if you're unsure about whether you need life insurance and which policy is right for you.

Let Unbiased match you with the right professional for your needs.