Life insurance is a vital part of financial planning for anyone who has dependents. By ‘dependents’, we’re referring to those whose circumstances and material wellbeing would be affected by your death. So that means your partner, your children or anyone else who is financially reliant on you.

If you have a partner and children, then the two of you should think about life insurance, regardless of whether one or both of you are earning. After all, how would the family cope if the partner who stayed at home were to die? The survivor couldn’t just give up work to care for the house and children, so money would be needed to make alternative arrangements.

All this can be a delicate and even difficult topic to think about, which is why many people fail to act. But not doing anything puts their loved ones at grave financial risk. That’s why it’s crucial to grasp the nettle and get your life insurance – and that of your partner, if you have one – properly sorted out.

A simple guide to life insurance

We know it’s not a cheerful thing to think about, but life insurance can give you peace of mind. It can help to reduce the worry of leaving loved ones and dependants without the money to cover debt or bills, should you pass away. Money never replaces a family member, but it can help knowing that it won’t be a worry.

Certain factors may affect your premium. Your age, your health, how long you want cover for, the level of cover you need and whether you smoke. So be sure to compare to find the right policy for you.

Deciding which type of life insurance is right for you and your family depends on your needs:

What do my loved ones need?

There are two main types of policy to think about.

1. Level-term insurance gives you cover for a fixed amount of money, for a fixed amount of time. If you pass away within that period, the policy pays out a lump sum. Useful if you want to leave a lump sum for your loved ones so they can continue with their way of life.

2. Decreasing cover insurance designed for people whose financial commitments will reduce over time. For example, if you’re repaying a mortgage. The amount of money needed after your death to cover the mortgage will naturally decrease as you pay it off.

Once you’ve decided on the policy you need, there are a few types to consider, depending on your circumstances:

Critical illness cover

Pays a tax-free sum of money to cover the costs of certain serious illnesses eg: to help with things like a mortgage payment if you’re unable to work. All critical illness policies cover cancer, heart attacks and strokes.

Joint life policies

Made for couples who share financial commitments. They can sometimes be cheaper than two separate policies, but it is worth knowing these policies end once one partner passes away. So if you wanted to continue the policy after it’s paid out, you would need to consider buying a new policy.

Over 50s plans

Often known as Guaranteed Whole of Life plans, these tend to cover a smaller payout for things such as funeral expenses or debt. But the amount of the premium will be guaranteed for the life of the policy.