Money Minder UK

Why do people take out life insurance policies? (continued)

It is a common mistake to financially undervalue a non-employed spouse or partner. If they were to die unexpectedly the surviving parent may need to either change to part time hours or even give up work altogether to look after the children or pay for childcare. Either way this could prove very expensive. The level and cost of the childcare needed will depend on the ages of the children. Knowing how much childcare might be required and for how long will help you to establish the cost of putting that care in place. Once known this will also help you to determine how much life insurance should be put in place for this specific purpose.

Life insurance is also sometimes put in place to cover the cost of education expenses if there are children that are at a private school or are already expected to attend university. The death of a main wage earner could mean that school fees and/or university tuition and expenses for children may not be affordable and in these cases a payout from a life insurance policy would help to ease the financial strain.

These important plans are often also commonly used to cover an outstanding mortgage debt. In addition to covering a mortgage debt, as the modern consumer culture plunges more and more of us further into debt via personal loans and credit cards, many people want to ensure that these personal debts are not passed onto their family - a life insurance policy can help them to do this.

Next: Do I need life insurance?