When should you consider buying term life insurance?

Some couples will take out term life cover as soon as they start to have financial commitments and they appreciate that if one of them was the die the remaining loved one would have to face those financial commitments alone.  Money will never replace the loss of a loved one but it can help get through the immediate financial hardships. Even enough money to cover funeral costs, all existing debts and enough for one or two year’s standing costs going forward then that can help reduce the immediate concerns. Ideally provision for a much longer period would be preferable. Whilst certain living costs can be managed by two people perhaps both working, one person alone may find real financial problems.

When people start to take on a loan or mortgage then they need to consider what would happen if they were no longer around to continue to pay of the monthly payments on that loan. If they died would their estate or their dependants be able to clear the debt. Would at worse the home have to be sold to meet the debt. This is why most people who take out a mortgage also purchase term life insurance to protect the outstanding balance of debt left on that mortgage.

When people have dependants it is natural that they want to provide for them if they themselves were to die. Term life insurance is one of the various life insurance products that can be used for that purpose. The 2006 ASHE weekly median pay for all full time workers was shown as £447 per week. That equates with £25,272 per year. You may expect to earn more or less than this figure. If you were to die how many years wages would you like to provide for your family going forward.

Over the term of our life we may be fortunate to build up riches. With the increase in the property market this may be easier to do than we would expect. However if those riches exceed a certain amount then when we die they will be subject to inheritance tax and death duties. A report in 2005 indicated that inheritance tax could hit five million home owners based on the value of the property alone and ten million could be affected if other owned wealth is also considered. Insurance can be a way of helping to offset the cost of inheritance tax. Term insurance may or may not be best suited for use in this case and it will depend on each persons own particular situation.

Many of us now are choosing to be self employed or to go into partnership or own shares in our own firm. If we are in partnership or are the main worker/shareholder in our own company then how to we provide for those we work with and our family if we were to die. Would our partner or children want to take over the firm and even if they did, would they have the skills, time and ability to operate the firm successfully. Equally we may have agreed to financially help or support someone going forward. That may be an important personal commitment to us. What would happen if we then die? Certain term life policies may provide possible solutions in these cases.