Everyone faces uncertainty in life. But when it comes to your finances and health, sorting your life insurance is one way to lessen the blow.
So, let’s dive into one of the top-asked questions about life insurance - do you need term life insurance, income protection, or both? Let's find out.
Understanding life insurance
At its core, life insurance is a contract between you and an insurance company. But it’s also so much more than that, it’s there for peace of mind for you and your loved ones.
You pay premiums, and in exchange, the insurance company can pay out a lump sum to your loved ones if the worst happened during the term.
No matter what type of cover it is, the purpose remains to provide financial protection to yourself, and those who depend on you. But if you have people who rely on your income - a spouse, children, ageing parents, or anyone else - life insurance isn't just a nice-to-have; it's a must-have.
Unpacking income protection insurance
On the other hand, income protection insurance is there to give you a helping hand with your income if you're unable to work due to illness or injury. It's your financial safety net when life throws a curveball at you.
Think about it. What happens if you get seriously sick or injured and can't work for an extended period? With income protection, you can keep up with your bills, afford the essentials and maintain your standard of living.
Life insurance vs. income protection: what are the key differences?
While both types of life insurance serve very different purposes, it's vital to understand their key differences. Life insurance pays out upon death, whereas income protection steps in when you can't work due to sickness or injury.If you have dependents or debts like a mortgage, life insurance should be non-negotiable.
If your livelihood relies heavily on your ability to work and earn, income protection is equally crucial. It’s best to seek help from a life insurance expert, so they can help guide your decision based on your specific circ*mstances.
Why not both?
In reality, life insurance and income protection insurance are two sides of the same coin. They work in tandem to provide comprehensive financial protection for you and your loved ones. Why? Because the unexpected doesn't discriminate.
So, it's not a matter of choosing one over the other. Instead, it's about crafting a plan for your future that can consider your circ*mstances, dependents, debts, and goals.
Our experts can do just that. They will consider the above and more by listening to your needs, having a good old chat, and crafting the right policy.
Have you heard about the benefits?
There are so many reasons why life insurance should be at the top of your to-do list. The pay-out is the reason that anyone looks into life insurance. But what about the added extras included in your cover?
To keep up with our ever-growing needs, many of the UK’s top life insurers include free extras in their cover*. Below are just a few examples of what you could get included with your policy:
- Access to online 24/7 GP appointments
- Second medical opinions
- Mental health support
- Tailored fitness and nutrition plans
- Personal nurses
There’s other types too!
Aside from income protection and life insurance, there are plenty of other types too! Here is a little summary of some of the other types of life insurance policies you can get:
- Critical illness cover is a type of life insurance that covers you against critical illness. If you were diagnosed with a listed critical illness, your cover could pay out a lump sum. This money would mean you’d have one less thing to worry about, during your recovery.
- Mortgage protection is there to cover the remaining balance of your mortgage. If the worst were to happen, this type of life insurance will pay out a lump sum. This means that your loved ones won’t be left with the financial burden of paying off the mortgage, after you’re gone.
What will your choice be?
Time waits for no one, and having the right cover in place is crucial.
If you’re only going to choose one policy, consider your biggest worry. Are you more concerned about leaving your loved ones with a lump sum, after you’re gone. Or is your biggest worry having to take time off work because of illness or injury?
But it’s important to remember; you don’t have to make a choice - if both policies fit within your affordability, this could be an option for you too.
The need for financial protection isn't a future concern—it's an immediate one. Whether it's life insurance, income protection, or both, the right time to act is now. Remember, you're not just doing this for yourself. You're doing it for the ones you love and for your future. Take your first steps today, with Caspian Insurance!
*Benefits are not contractual and may be removed at any time
FAQs
There's no one right answer for everyone. Your need for life insurance depends upon your circ*mstances, including the financial impacts your death may have on your dependents or loved ones. It may be worth exploring the different life insurance policies and benefits to make an informed decision.
What is better, life insurance or income protection? ›
Life insurance pays out upon death, whereas income protection steps in when you can't work due to sickness or injury. If you have dependents or debts like a mortgage, life insurance should be non-negotiable. If your livelihood relies heavily on your ability to work and earn, income protection is equally crucial.
Do I need both life insurance and income protection? ›
If you have dependants that rely on your salary and want to protect the family financially, it may be of benefit to consider whether both life insurance and income protection insurance would be worthwhile to have.
At what point do you not need life insurance? ›
Life insurance in retirement can also help you leave an inheritance and pay estate taxes. You may not need life insurance in retirement if you're debt-free, have prepaid your final expenses, and don't want to leave a larger inheritance.
Is life insurance really necessary? ›
The Bottom Line. There are many good reasons to carry life insurance, although it's not a must for everyone. It's important to take stock of your financial and life situation to determine what is in the best interests of you and your family. By doing so, you can decide whether you need life insurance or not.
What is the main disadvantage of life insurance? ›
Cons of life insurance
One disadvantage of life insurance is that the older you are, the more you'll pay for a policy. This is because you're more likely to pass away during the policy period than a younger policyholder and will, in turn, cost the life insurance company more money.
What type of life insurance is worth it? ›
Cash Value With Permanent Life Policies
Cash value is an attractive feature of permanent life insurance policies that builds added financial reserves you can tap into in the future. Also, any cash value growth is tax-deferred, and your beneficiaries don't need to pay taxes on the death benefit.
Is it worth having income protection? ›
Income protection insurance is invaluable if you cannot work due to disability or illness. However, before you take out a policy, it is worthwhile to understand what is covered and the factors that can impact your monthly premium.
How much life insurance should you have in relation to your income? ›
Another way to calculate the amount of life insurance needed is to multiply your annual salary by the number of years left until retirement. For example, if a 40-year-old currently makes $20,000 a year, they will need $500,000 (25 years × $20,000) in life insurance to reach age 65.
Do you need life insurance if you're alone? ›
The amount of life insurance a single person needs depends on their age, health, debts and future financial goals. There are rules of thumb to help determine how much life insurance is needed, but it's best to take advantage of available resources and professional advice to choose what makes sense for you.
Many people in their 60s and 70s may no longer need life insurance. They may have already paid off the house, stopped working, sent the kids off to care for themselves or accumulated enough assets to offset the need for life insurance. But sometimes buying or maintaining a life insurance policy over age 60 makes sense.
Can you live without life insurance? ›
Regardless of your age, if you are at a point where you have enough income and assets to comfortably support yourself and the people who depend on you financially, you may not require life insurance. For most people with families, this only happens later in life after their children are grown and self-sufficient.
What is the rule of thumb for life insurance? ›
Human Life Value*
Based on the value of your future earnings, a simple way to estimate this is to consider 30X your income between the ages of 18 and 40; 20X income for age 41-50; 15X income for age 51-60; and 10X income for age 61-65. After age 65, coverage is based on net worth instead of income.
Why don't you need life insurance after you retire? ›
Sincelife insurance helps replace lost income to your family when you die, you may want to keep your policy if your spouse or other family members are relying on that income. However, if you have very little income from your retirement job, then there's probably no need to continue with the policy.
Is life insurance worth it Dave Ramsey? ›
If you don't have anyone who'll need that income when you die, then you don't need life insurance. Or if you're doing so well financially that you're self-insured, you're still good to go without it.
Why you shouldn't wait to get life insurance? ›
Life insurance premiums are based on your age as well as health and other factors, so the older you are when you apply, the more you'll pay for coverage. By purchasing life insurance early on, you can lock in a lower premium and save money over the long term.
Is life insurance a good way to avoid taxes? ›
Life insurance allows you to transfer a death benefit to beneficiaries income tax-free. While estate taxes can apply to life insurance, there are strategies to avoid these taxes. Permanent life insurance also builds cash value you can use while alive. Cash value grows tax-free while in your policy.
Is it better to save or have life insurance? ›
A savings account better suits the young professional worker who does not have dependents and is just starting to build up savings for a rainy day. But as your career progresses and you start a family, the best way to financially protect your dependents in case of your untimely death is to invest in life insurance.
Why is life insurance not a good investment? ›
Any permanent life insurance policy with a cash value can be used to invest — but for most people, it isn't the best strategy due to high costs and low returns. Buying a term life policy and contributing to a 401(k) or IRA account is often a better option.
What type of life insurance gives the greatest amount? ›
Term insurance is initially cheaper than other types of policies that offer the same amount of protection. Therefore, it gives you the greatest immediate coverage per dollar.
