How Important is Life Insurance for Your Retirement Savings?

How Important is Life Insurance for Your Retirement Savings?

No one wants to think about dying unexpectedly, but preparing for the worst means you can enjoy the present without stressing about the future. What would your death mean for your loved ones financially? Life insurance policies offer the invaluable reassurance that they will still be provided for when you’re not there.

Hansford Bell is a team of financial planners and advisors based in Tavistock. Whether you’re going through a life transition or making an important financial decision, we’re here to provide all the information and independent advice you need to make the most suitable choice for you.

In this guide, we explain everything you should know about life insurance.

What is Life Insurance?

Life insurance is a type of insurance product that provides financial support to your loved ones in the event of your death. This support can take the form of a lump sum or a series of payments, and the amount your family receive depends on the specific product and level of cover you buy. It can also be a single or joint policy.

Essentially, life insurance is a safety net for your family, enabling them to continue living in the way they are accustomed and navigate the difficult period of time following your death. Though the future can never be truly predicted, having the right protection in place can relieve some of the burden that comes with an unexpected illness or fatality.

Types of Life Insurance

There are two main types of life insurance products available, distinguished by the amount of time they cover.

  • Term Life Insurance – these policies are exactly what you might expect; they provide cover over a fixed period of time called the term of the policy. 5 year, 10 year, and 25 year policies are common. Importantly, this policies will only pay out if you die during this period.
  • Whole of Life Insurance – these policies don’t have a fixed end and provide financial support to your family whenever you die, as long as you have kept up with monthly premium payments, which tend to be more expensive. They are commonly used as a complement for retirement savings or as part of inheritance tax planning.

Do I Need Life Insurance?

Life insurance policies are designed for people who provide financial support to children or partners. If you have dependants who you support and you’re worried about what might happen if you die, life insurance can provide peace of mind that their needs will be met even when you’re gone.

If you’re single, have no children, or your partner earns enough on their own to keep up with their financial commitments, it probably isn’t necessary. It’s also worth checking if your employer offers a ‘death in service’ benefit, as this might already provide sufficient cover.

However, some people also choose to use whole of life insurance for inheritance tax purposes or as a complement to their retirement income. If you want more information on how to do this, our estate and tax planning team can explain everything you need to know.

How Much is Life Insurance?

The price you pay for a life insurance policy will depend on a number of factors, including the provider, the type of policy you choose, and the level of cover you go for. Often, they are considered a good investment as a policy can provide adequate financial protection for your dependants for the equivalent of a few pence a day. However, the cost will also consider your age, health and medical history, occupation, and lifestyle – which can inflate the price. Whole of life policies are typically more expensive, and it’s important to check that the amount your family will receive justifies the amount you might end up paying over time or if you live longer than expected.

Life Insurance & Retirement.

Retirement savings can sometimes be complemented by life insurance if the policy you choose is whole of life. This is because some policies of this kind accrue cash value, and some even pay dividends to act as a living benefit for customers. As a result, they can be used to supplement your income in retirement. However, the primary objective of life insurance products is to provide for your relatives if you die prematurely.

Whole of life insurance can also be used as a type of inheritance tax planning. By taking out a life insurance policy in trust, you can provide your family with tax free inheritance that won’t contribute to the value of your estate. More than that, life insurance often pays out before probate is granted, offering the financial support your family needs in this interim period.

Experienced Life Insurance Advisors in Devon & the South West.

A good financial plan involves planning for the unexpected. If you want to find out more about life insurance and what options there are available on the market today, feel free to contact a member of our friendly team.

We offer all our clients a free initial consultation so you can get to know us and how we work. Then, we’ll source the most suitable insurance products from across the whole market and help you make a choice that works for you and your family.

Note: This blog is for general information only and does not constitute advice.