Life Insurance help

IrishRose12

Can someone explain to me in Simple terms please?

I turn 40 this year, have never had life insurance.  Am single no kids, no savings and a low paid job in a school.  I'm on a permanent 52 week contract but don't get paid 52 weeks. 

I would like to leave something to my nieces and nephews when I do go, I want my bills and funeral costs to be covered aswell as some money left to them also, but have no idea what I need to do.

Anything I've looked into, I can pay into say over 25-30 years, but at the end of that 25-30 years, if I'm still alive, and it's all paid up, Its not as simple as keeping the policy safe until the enevitable happens,  The coverage stops then and I'll have - in my opinion - wasted say £20/£30 a month for all of those years and nothing to show for it when I go, and no payout for them.  

Am I better just to put the money away into a credit union account or bank account, or in a tin under the bed for them instead? 

Any simple advice would be greatly appreciated.

user1977

Life insurance products are mainly to cover the risk of e.g. dependants losing the breadwinner of the household prematurely and not being able to afford the mortgage - so if a claim isn't made the money hasn't been "wasted", in the same way that you don't consider other insurance premiums "wasted" because you haven't crashed your car or burned down your house.

By all means make a Will and leave your nieces/nephews whatever you have when you go, but it seems daft to spend money on an insurance premium just to ensure that they have some sort of inheritance if you die prematurely. In reality all it's likely to do is reduce the amount of your estate when you do eventually go.

Looks elsewhere on this site if you want ideas about investment products etc.

mebu60

If you want to keep things simple I'd suggest paying it into a savings account which offers a decent interest rate. Are you comfortable with online banking and opening a savings account online? Do you use apps for your personal finances?

This would also have the benefit of providing you with an emergency fund.

IrishRose12

mebu60 said:

If you want to keep things simple I'd suggest paying it into a savings account which offers a decent interest rate. Are you comfortable with online banking and opening a savings account online? Do you use apps for your personal finances?

This would also have the benefit of providing you with an emergency fund.

I do use a banking app, and do have a savings account but there's not much in it.  I do have a credit union account so would probably be better using that as I have a direct debit set up for that and I don't go near it.  
It's just that, the last I checked the limit before tax etc got involved was £10,000 and would have liked to have had a bit more.

Maybe the credit union is the best option, and just putting cash away each month would be a better option. 


To be honest, I'm not a great saver, and struggle to stop buying things I really don't need.  Maybe this should be my focus 1st.

It's just something I've wondered about for a while. I know some friends have said they have life insurance, again, some single, and they have said that whatever type  ot is they have, once it's paid out, their family will still get money even of they had paid up the policy years before they died.  They will keep it in their important papers box for when the time comes.

But I'm too embarassed to ask them what type  they have and any other personal details about them. As I literally know nothing about this sort of stuff.
I've just come to realise that at almost 40 I have nothing to show, no savings and literally am the poor aunt lol.  At some stage in the possible near future I'll have to look into getting a small mortage to buy out my siblings for the family home etc, but with the way my job is and the fact I don't get paid every month I don't even know if I can get one.  

Aretnap

IrishRose12 said:

Am I better just to put the money away into a credit union account or bank account, or in a tin under the bed for them instead? 

The short answer is "yes".

Life insurance is primarily to protect your dependants from the risk that you die young. So your spouse can pay the mortgage without your income, so your children don't have to leave school and work up chimneys without you to feed them etc etc. So it only typically lasts until the time in your life when the mortgage is likely to be paid off, your kids are likely to have left home etc etc. If you live to be 95, congratulations, you have won life's lottery so you don't need a payout. It doesn't mean that you wasted the money, any more than money you spent on home insurance was wasted because your house didn't burn down.

If you don't have financial dependants (which usually means a partner and/or children) then you don't really need life insurance.

You can get whole of life policies if you really want one, which will pay out regardless of when you die. They are a lot more expensive than "normal" life insurance though for the obvious reason that the insured will always have to pay out, the only question is when.

If you do have £20-30 spare each month to spend on life insurance then you would very likely be better off saving or investing it with your nieces and nephews in mind. As well as probably having more money if you live an average lifespan, that way

(1) You can give it to them before you die, and actually enjoy watching them benefit from it, 
(2) If you fall out with them, or decide that you need it more than they do (perhaps they'll all become investment bankers or win the lottery) you always have the option of spending it on yourself instead and,
(3) If you can't afford it in the future you just stop saving for a while, whereas with a life insurance policy if you miss a payment (or at least if you miss a string of payments) the policy gets cancelled and you really have wasted everything you've paid in up to that moment.

IrishRose12

Aretnap said:

IrishRose12 said:

Am I better just to put the money away into a credit union account or bank account, or in a tin under the bed for them instead? 

The short answer is "yes".

Life insurance is primarily to protect your dependants from the risk that you die young. So your spouse can pay the mortgage without your income, so your children don't have to leave school and work up chimneys without you to feed them etc etc. So it only typically lasts until the time in your life when the mortgage is likely to be paid off, your kids are likely to have left home etc etc. If you live to be 95, congratulations, you have won life's lottery so you don't need a payout. It doesn't mean that you wasted the money, any more than money you spent on home insurance was wasted because your house didn't burn down.

If you didn't have financial dependants (which usually means a partner and/or children) then you don't really need life insurance.

You can get whole of life policies if you really want one, which will pay out regardless of when you die. They are a lot more expensive than "normal" life insurance though for the obvious reason that the insured will always have to pay out, the only question is when.

If you do have £20-30 spare each month to spend on life insurance then you would very likely be better off saving or investing it with your nieces and nephews in mind. As well as probably having more money if you live an average lifespan, that way

(1) You can give it to them before you die, and actually enjoy watching them benefit from it, 
(2) If you fall out with them, or decide that you need it more than they do (perhaps they'll all become investment bankers or win the lottery) you always have the option of spending it on yourself instead and,
(3) If you can't afford it in the future you just stop saving for a while, whereas with a life insurance policy if you miss a payment (or at least if you miss a string of payments) the policy gets cancelled and you really have water everything you've paid in up to that moment.

Thank You. This I think is what I needed to hear. Very much appreciated. You've put my mind at ease

mebu60

Don't forget that you can currently earn £1k of interest tax free in a tax year as a basic rate taxpayer. You'd need to get over 5% on £20k to achieve that.

If tax is a concern, look at Trading 212's cash ISA currently paying 4.76%. 

Keep_pedalling

You are still young and likely to live for several more decades yet, so I would be looking at a S&Ss ISA rather than cash savings that struggle to keep up with inflation. 

johncarlo

If you want guaranteed coverage for life and a payout for your nieces and nephews, consider whole life insurance; if you prefer flexibility, saving in a secure account might be better.