When we think about life insurance, we often link it to people who have jobs. But what about those who don’t work? This might include stay-at-home parents, people taking a career break, or those on disability leave. It’s a common question: do they need life insurance too?
In this article, we’ll clear up some confusion about life insurance for people who aren’t earning a salary.
We’ll look at why it’s still important for them, what kinds of policies are out there, and how being out of work affects getting life insurance. Our aim is to give you clear, straightforward information so that everyone can understand their options, whether they’re working or not.
Can you get life insurance if you don’t work?
Many people overlook the significant role that non-working partners play in a household.
These individuals may not bring in a traditional salary, but their contributions are invaluable, especially in families with children.
The absence of a non-working partner can have a substantial economic impact.
Non-working partners often manage a variety of tasks that, if outsourced, would be quite costly. This includes childcare, home maintenance, and other domestic responsibilities. The cost of replacing these services can be surprisingly high.
Various studies have attempted to put a monetary value on the work done by stay-at-home parents. For instance, a stay-at-home mum might manage tasks equivalent to £29,535 per year, while a stay-at-home dad might cover tasks worth £21,601 annually.
These figures highlight the significant, often unseen, financial contribution of non-working partners.
In the unfortunate event of the loss of a non-working partner, the surviving members may face new expenses. Childcare and additional help around the house can lead to considerable financial strain.
This is where life insurance can help. It can provide the necessary funds to cover these new costs, ensuring the family’s lifestyle doesn’t suffer drastically.
Single parents
As a non-working single parent, considering life insurance is essential, even when managing on a limited budget.
Your role as a full-time caregiver has significant value, and in the event of your absence, life insurance can provide a financial safety net to cover the costs of childcare and other essential services.
Even if you don’t work, life insurance cover is available to you.
Affordable options like family income benefit life insurance offer death cover without overwhelming your budget. These policies can be tailored to your financial constraints while ensuring your children’s long-term security and well-being.
Seeking advice from a financial adviser would be a good idea. They can recommend companies that suit your personal situation and can make sure that the premiums are competitive and affordable.
It’s important to recognise that having some level of death cover is better than having none. So spend what you can afford right now, even if it’s not quite enough.
Policy Types
Life insurance isn’t one-size-fits-all, especially for those who don’t have a regular income from employment. Understanding the types of policies available and how they can be tailored to suit non-workers is key. Here’s a breakdown of the options:
Term Life Insurance
Level term insurance is active for a set period, say 10, 20, or 30 years. It’s a straightforward choice, providing a lump sum payment to beneficiaries if the policyholder passes away during the term. For non-workers, this can be an affordable way to ensure that their family has financial support for critical years, like while children are growing up.
Family Income Benefit
This is a type of term life insurance that, instead of paying out a lump sum, provides regular, tax-free income to the beneficiaries for the remainder of the term. This can be particularly useful for families who might find managing a large sum of money challenging and would prefer a steady income stream to cover daily expenses.
Joint-Life Policies
These are designed for couples, paying out on the first death but then ending. While they can be cost-effective, they may not always be the best choice for a non-working partner. If the working partner passes away first, the non-working partner, who might find it more challenging to get insured later in life, would be left without coverage.
Increasing/Decreasing Term Insurance
These policies are designed to either increase or decrease the sum assured amount over time. An increasing term policy might be suited for someone expecting their financial responsibilities to grow, whereas a decreasing term policy is often aligned with a reducing mortgage balance.
Each type of policy has its advantages and considerations. Non-working individuals need to think about what their family would need in their absence.
Would they need a lump sum to pay off a mortgage or debts, or would an ongoing income be more helpful?
Understanding these needs will help in choosing the most appropriate type of life insurance.
How does family income benefit work?
Ever heard of an insurance plan that gives your family a monthly income instead of a one-off payment? That’s Family Income Benefit (FIB) for you. It’s a unique way to make sure your loved ones have steady financial support when times get tough. Read on to find out how Family Income Benefit insurance works and who it is suitable for.
The Application Process
Applying for life insurance as a non-worker might seem challenging at first, but the process becomes more manageable once you understand what insurers look for.
Firstly, it’s important to realise that being unemployed or a non-worker does not automatically disqualify you from obtaining life insurance.
Insurers look at several factors, such as your age, health, lifestyle choices, and your family’s financial situation.
Your health and lifestyle are particularly significant in the application process. Insurers pay close attention to aspects like smoking habits, any pre-existing health conditions, and your family medical history, regardless of your employment status.
When you apply, you’ll need to provide detailed personal information, including your medical history and lifestyle specifics. If you’re a non-worker, especially someone with primary caregiving responsibilities or who manages most household tasks, these details can be quite relevant.
Insurers also consider the overall financial situation of your household. This assessment helps them determine whether the coverage amount you’re requesting aligns with your family’s needs and financial circumstances.
Given the complexities involved in choosing the right policy and determining the appropriate level of cover, seeking professional guidance is a wise step. Financial advisers can tailor a policy that fits your specific situation.
The overarching aim of life insurance is to offer financial security for your loved ones. Therefore, being transparent and honest in your application is critical to finding a policy that not only provides peace of mind but also adequate protection.
Options for those Individuals on Disability
People who are on disability leave face unique challenges when looking at life insurance options, as their situation significantly impacts both eligibility and coverage. When applying for life insurance, being on disability leave doesn’t mean automatic exclusion.
Insurers will, however, consider the nature and severity of the disability, which can influence the types of policies available and the associated premiums.
Another critical factor is the presence of any pre-existing conditions. Insurers assess the risks tied to these conditions, and depending on the disability’s origin, this could result in higher premiums or specific exclusions within the policy.
There are insurance providers who specialise in policies tailored for individuals with disabilities or pre-existing conditions. These specialised policies are often more accommodating, offering more suitable coverage and premium rates for those with specific health concerns.
Additional Options
When considering life insurance, it’s also worth exploring additional covers that can provide further support during your lifetime, not just after you’re gone.
One such valuable addition is Critical Illness Cover. This cover offers a lump sum payment upon the diagnosis of a specified serious illness. It’s designed to ease financial pressures at a time when your focus should be on recovery and health. The payout from this cover can be used for a variety of purposes, such as covering medical treatments, adapting your living space to accommodate new health needs, or providing financial support during a period when you might not be able to work.
Another important enhancement is Income Protection. This cover provides you with a regular income if an illness or injury prevents you from working. Especially for those without other financial safety nets, this can be crucial in maintaining financial stability during extended periods of absence from work.
Additionally, consider the Waiver of Premium feature. This aspect of life insurance ensures that your policy remains active, even if you find yourself in a situation where you’re unable to work and thus unable to pay your premiums. It’s a safeguard to ensure your life insurance coverage continues without interruption during financially difficult times.
Choosing the right combination of additional covers requires a careful assessment of your personal and family health history, financial obligations, and existing support systems. These factors play a significant role in determining the types and levels of additional coverage that are most suitable for your unique situation.
Some Insurance is Better Than No Insurance
While understanding all of the different life insurance options is helpful, it’s equally important to recognise that having some level of cover is better than having none at all.
This is especially true for individuals who might feel that their life insurance needs are minimal or who are currently without dependants.
The reality is that life circumstances can change unexpectedly. The cover you choose now can provide a foundation of financial security, not just for potential future dependants, but also for handling your own personal affairs. For instance, even a modest life insurance policy can cover funeral costs, a consideration that can alleviate financial stress for your family during a difficult time.
Moreover, life insurance can serve broader purposes than just income replacement or debt settlement. For individuals without immediate family, it can be a way to leave a legacy, whether to extended family members like nieces and nephews, or to a charitable cause close to your heart.
Life insurance policies can adapt to changing life circumstances. While you might start with a basic policy, many insurance plans have a guaranteed insurability option. This offers the flexibility to increase coverage as your life evolves – such as getting married, having children, or taking on significant financial commitments like a mortgage.
