Smart Guide to Life Insurance

1. Do I need insurance?

What you'll learn in this step: You only need life insurance if there are people who depend on you financially.

Life insurance really only becomes an issue once you have dependants – that is, once you have a partner or children.

Households come in all shapes and sizes these days. One person could be the main breadwinner and the other provide a smaller but still vital part of the household's income; perhaps both of you work and have relatively equal incomes; maybe one person is at home with the children or even an elderly relative.

The question is: if something should happen to you, would your partner or children or wider family end up in difficult circumstances.

You might be the main breadwinner. Even if your income is the secondary one, its loss could still leave a big hole in the family budget. If you're in unpaid work at home, your life may still be worth insuring because your role as caregiver would have to be filled by paid help.

If you've got children, life insurance is almost certainly required. If you've got a mortgage or other loan repayments requiring two incomes, you'll need life insurance.

If you don't have children or large debts, think about whether your partner would be able to adjust, perhaps by going back to work – in which case insuring your life isn't required.

It's not just about life and death, though. Also consider how you would cope if you became disabled or seriously ill and unable to work. Income protection, disability, trauma and critical illness insurance may help put your mind at rest.