The answer to this question is subjective, so your personal circumstances are likely to determine whether life insurance is worth it or not. If you ask this question about most kinds of insurance, the answer would be the same. Is buildings, car, mobile phone, pet insurance worth it? Most people wouldn't know unless they found themselves in a situation where they needed to claim. Anyone who has claimed against an insurance policy will, most likely, say it was worth it. Others who had the insurance and didn't ever need to claim may say the same but a small number of people will, inevitably, feel it wasn't worth it because they never had to use it.
Not everyone will need life insurance and it is important to consider when and why you need it.
Do you need life insurance?
If your death would cause financial hardship for others then yes, you need life insurance. The importance of any insurance is not only determined by the monthly cost of it but also by understanding whether circumstances would be difficult or even catastrophic without it. Life insurance provides a material benefit, normally in the form of a tax-free lump sum of money. This will help prevent any financial stress and hardship caused by death.
The financial implications of a premature death
- Debts and mortgage left outstanding, which could lead to your dependents losing their home
- Dependents struggling financially to pay for their day-to-day living
- The burden of charges applied to your assets in the form of inheritance tax if you exceed certain thresholds
Our article "Do you need life insurance?" helps pinpoint when life insurance is needed and when it is not.
Which life events trigger the need for life insurance?
Certain life events trigger the necessity to review your circumstances because of the impact that your death or an illness may have on the people in your life.
What do you need to protect if you die?
Look at your life and then imagine not being in it. Think about who would suffer financially and how much much it would take to resolve the financial impact. In the table below we explore some of the life events that create a need for life insurance and the reasons why.
The life events that create a need for life insurance
| Life Event | Why you need life insurance |
| Marriage/Cohabitation | If your partner or spouse relies on your income they will need money to survive and maintain their lifestyle. |
| Divorce | If you're making or receiving maintenance payments, life insurance might be needed to ensure that it continues. It is sometimes a condition of a divorce settlement. |
| Birth/Adoption of a child | Raising children is an expensive job and the cost of this could become a burden for a surviving parent or guardian. Whether you're earning an income or raising your children, the impact of your death will have a financial impact. |
| Borrowing Money | Debts have to be repaid. If your family cannot afford the mortgage on their home, this could jeopardise the roof over their heads. |
| Inheritance | If your estate is valued at more than the allowed amount before inheritance tax is applied, your beneficiaries might have to eat into it to pay this. |
The amount of insurance you need and the length of time you need it over is directly linked to what you need it for. This will change from time to time. A review will stop you forgetting why you have the insurance in place and allow you to keep an eye on what you're spending so that it doesn't become unmanageable. Most reputable life insurance advisers* provide this service without charge so it makes good sense to speak to one to check that what you have is what you need.
If you would like to read more about how to work out how much life insurance you need, this article will help you "How much life insurance do I need?"
Family security is one of the largest drivers for buying life insurance and you can read about a specific kind of life insurance called Family Income Benefit in this article "The best and cheapest Family Income Benefit policy"
When is life insurance not worth it?
If there is no financial loss caused to anyone by your death then life insurance probably isn't worth it.
The life events that may mean you do not need (or no longer need) life insurance
| Life Event | Why you don't need life insurance |
| You pay off your mortgage/debts | If your house is mortgage-free and/or there are no other debts, your family won't need the money to pay for these. |
| Your children grow up | If your children no longer depend on you financially then they won't need a financial payout if you die. |
| You retire | If your income is no longer earned and/or your pension and savings will provide an adequate benefit to your spouse or partner to live on they may not need a life insurance payout to support them. Most people's outgoings reduce significantly in retirement. |
| Inheritance Tax | If there is no inheritance tax payable on your estate or you are happy for it to be paid from the estate then you don't have to leave a sum of money to provide for this. |
| Funerals | If there is enough money put aside to pay for funeral arrangements you needn't worry about making this provision. (Bear in mind the increasing cost of funerals over the years.) |
When is the cheapest time to buy life insurance?
Life insurance is cheapest when you're young and healthy. Unfortunately, this is when few of us are thinking about it. Buying a life insurance policy early in life can reduce the cost of it even if you live a very long life.
If you are young and healthy and have no financial dependents, then you may feel that life insurance is unnecessary. Ironically, this is exactly when life insurance is cheapest and easiest to buy.
If you are reliant on your physical ability to work to earn the money that you depend on, consider sickness insurances such as income protection and critical illness insurance. These can provide you with a financial buffer in the form of an income or a lump sum if you become incapacitated through sickness or an accident. You can read more about income protection insurance and critical illness insurance in the following articles.
- Income Protection - do you really need it?
- Critical Illness Insurance - what is it and is it worth having?
It is common for people to stop needing life insurance once they retire. For this reason, the most popular type of life insurance is a level term assurance policy. This is a policy that covers you for a set number of years and pays out a tax-free lump sum of money if you die before the policy finishes. Buying a policy like this and keeping it until retirement may be all you need.
Often people mistakenly put off buying life insurance in the hope that it will save them money in the long run, but in the tables below we have demonstrated that this isn't the case.
35-year-old vs 50-year-old - Total premium comparison - Level term assurance
| Age at the start of the policy | Monthly Cost of £250,000 Level Life Insurance that expires at age 70 | Total Cost of the policy up to age 70 |
| 35 years old | £12.39 | £5,203.80 (35 year policy) |
| 50 years old | £25.70 | £6,168.00 (20 year policy) |
30-year-old vs 60-year-old - Total premium comparison - Whole of life insurance
| Age at the start of the policy | Monthly Cost of £50,000 Whole of Life Insurance that runs until you die | Total Cost if you live to 85 |
| 30 years old | £36.02 | £23,773.20 |
| 60 years old | £108.82 | £32,646.00 |
Crucially, a 30-year-old is less likely to have health conditions such as high blood pressure, diabetes or other illnesses than a 60-year-old. These types of medical conditions could make the insurance even more expensive and could result in your application being declined. It's a fact that the likelihood of developing certain health conditions is increased with age.
Reasons for buying life insurance when you are young and healthy
- It's usually cheaper even if you end up paying it for longer
- You'll keep the low cost throughout your life if you take a fixed rate
- The application will be easier because you're more likely to be healthy
How to work out what life insurance you need and what it will cost
The best way to understand how much life insurance you need to take out and how much it will cost is to speak with a specialist life insurance adviser*. It will give you the opportunity to discuss your circumstances and receive guidance around what to consider. Insurances that are relevant to you will be highlighted and then it is up to you whether you buy them. There is no one-size-fits-all solution and you should do what is right for you.
At Money to the Masses, we've vetted the services of a specialist life insurance broker* where the advisers provide this type of advice free of charge. They will tailor the insurance to your needs and tell you when something isn't right for you. Sticking to your budget is also part of what they build into this process. They're also trained to arrange your policy into trust, so that you can nominate who you want to benefit from the money in the event of a claim. You'll even receive £50 cashback when you arrange your insurance.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article - LifeSearch
