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I’m 33, single, earn over £100,000 and don’t drink or smoke — do I really need to take out a life insurance policy, or is it just a ruse?
Sam Grice, founder and chief executive of Octopus Legacy, an estate planning firm, says a common misconception about life insurance is that it’s only for people with a house and family. In reality, the question is less about relationship status and more about who would be affected financially if you were to die, either now or in the future.
That said, for a healthy 33-year-old with no dependants and a high income, it’s also reasonable to question whether this is a genuine financial need. If no one is likely to rely on your income now or in the future, it may be that the risk you’re insuring against may be smaller than you think.
However, even if you’re single, you can still leave a financial shadow that those you care about will have to deal with. Funeral costs, administrative fees and outstanding bills can fall to relatives or close friends. For high earners, these costs can be substantial if there are ongoing financial commitments to resolve. A life insurance policy can ensure that those closest to you, by blood or by choice, aren’t left with an unexpected financial burden at an already difficult time.
Another point often overlooked is that many life insurance policies now offer early payment if the policyholder is diagnosed with a terminal illness and you’re given less than 12 months to live. Without a financial safety net beyond your income, this can be critical. Being able to stop working without worrying about everyday expenses or housing costs provides stability and clarity when you most need it.
Life insurance becomes more expensive with age, and non-smokers typically secure better premiums. In this way, taking out a life insurance policy can be like fixing a low mortgage rate — policyholders can lock in lower long-term costs. But of course, unlike a mortgage, life insurance doesn’t pay for something you know you’ll need, it pays out only if something happens. Also, for those with substantial savings, employer benefits or family wealth, individuals should check that insurance doesn’t just duplicate what’s already there.
Our next question
Will my husband’s carried interest (performance-based pay from his employer) be taken into account in our divorce settlement? I know the tax rules on carried interest are changing, but I’m not sure what this means for me in our divorce.
However, I know first-hand that when someone dies, there’s already more than enough to cope with without money becoming another source of stress. When my mum died, we were suddenly faced with endless to-do lists, arrangements to make, and a growing list of costs. As a family, we were fortunate to be able to manage them, but at such an overwhelming time you want to focus on what truly matters, not on the next bill arriving, or feeling pressured to rush back to work.
Many modern policies require no medical exams and take about 15 minutes to apply for. You can even access policies that also offer bereavement support and guidance to help the people you love manage the administrative tasks after you’re gone.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com.