01 September 2022

Why you don’t need life insurance

It often seems like you can barely get through the day without one company or another shouting about the ‘fact’ that you desperately need to buy their ‘stuff’.

Trust us, we know how annoying that gets, which is why we like to be honest about whether or not you actually need our products.

For most of our customers, life insurance is the best way to continue to provide for, and support, their family when they’re no longer around to do it in person, but for other customers, we’d rather be upfront and say it’s just not something you need.

Surprised to hear us say that?

We want to make sure you’re spending your hard-earned cash on the right financial products – we like to be straightforward so if you find that you fit into one of the following three categories where life insurance is less important, it might be worth taking further advice and thinking again.

Category 1: You and Your Partner are Financially Independent

I’m sure most of us would like to fit into this category! Unfortunately, though, very few of us don’t rely on our partner to contribute financially to our current lifestyle.

If you do reach the point where you and your partner have enough assets and income to independently care for yourselves, though, life insurance may no longer be a necessity.

That’s not to say that high net worth individuals shouldn’t take out life insurance – it can help heirs and beneficiaries cover the costs related to winding up a deceased estate, for example – but it’s not usually a necessary expense for those that can financially support themselves.

How do you know if this applies to you? It doesn’t matter whether you’re newlyweds, cohabiting partners or whether you’re celebrating your Golden Wedding Anniversary, the one question you need to ask yourself is whether your partner will be able to maintain the level of income necessary for them to continue living the lifestyle you currently have, if you’re not around.

Unless each of you can manage to maintain that level of income on your own, having life insurance will mean there doesn’t have to be a drastic lifestyle change when one of you passes away.

Category 2: You’re Single and Nobody Relies on Your Income

So, if your partner relies on your income to pay the mortgage and contribute to outgoings, you need to make sure they’re provided for in the event of your death – but what if you’re single and nobody relies on your income? In that situation, there’s probably little point in paying for life insurance, but it’s not always completely black and white.

A life insurance policy that is written in trust usually lets you name anyone you have a relationship with as a beneficiary, so even if you don’t have a partner or dependants, there may still be somebody in your life who will need the money when you die.

Perhaps you are currently in debt and your assets wouldn’t cover paying that off, or maybe you’ve invested with somebody else (for example, sharing a mortgage with a sibling) and they would need the monthly payments to continue paying back the money? Life insurance would help your sibling continue to pay the mortgage so in that situation your brother or sister is still dependent on your part of the income even though they wouldn’t be traditionally defined as a ‘Dependent’ (usually a spouse or child).

Likewise, you may realise that your parents, particularly if elderly, are currently relying on money you provide to support them? Perhaps you pay board while living at home, or even just contribute to their finances regularly using your income. Again, it’s not a traditional definition of a ‘Dependent’ but still worth considering whether you want to take out life insurance to look after them when you’re not able to do it.

Category 3: Your Children are Self-Sufficient Adults

One of the most popular times in life to start a life insurance policy is when people become parents. Something about the weight of responsibility you have in caring for this gorgeous, helpless tiny individual motivates new parents to make sure they have plans in place to take care of their child if anything should happen to one of them.

But helpless babies don’t stay helpless for long! And before you know it, your bundle of joy will be moving out and starting their own life with their own income.

If your children have grown up and are self-sufficient adults, there’s less of a need to leave an income for them after you die. It may be time to consider whether you need to keep continuing to pay for life insurance once they reach a point where they can look after themselves.

Of course, children aren’t the only consideration and you still need to think carefully about whether your spouse would need an income after your death, but it is definitely worth reconsidering your position once your children have grown up.

Do You Fit Into any of the Three Categories?

If you do – let’s be honest – life insurance may not be the best opinion for you and nobody wants to be shelling out for something unnecessary. Take the time to carefully consider your own situation and, if you’re unsure, take further advice about whether you’re wasting your money paying for a policy.

The bottom line is – If there’s likely to be little financial impact on other people if your income stops, you may not need life insurance.

On the other hand, if you can think of anyone who would struggle to continue living the same way if you passed away, then a policy may be right for you.

If you think that might apply to you, don’t forget you can always check out our website to learn more about your options.