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If you have dependents or other people with whom you share your life, life insurance can play a vital and valuable role at virtually every stage of your life. Insurancebuddy.co.uk hope the information contained on this website can help you make smart choices when buying life insurance: how much to buy; which type of product to buy; and which one of the hundreds of life insurance companies to choose.

Why should I buy life insurance? Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:

Replace income for dependents If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognised case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.

Pay funeral expenses Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.

Create an inheritance for your heirs Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.

Pay estate taxes Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Tax laws can change over time so it is imporant to check the latest laws that may surround this issue.

Make significant charitable contributions By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy's premiums.

How much life insurance do I need? In most cases, if you have no dependents and have enough money to pay your final expenses, you don't need any life insurance. If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals. If you have dependents, buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur to replace services you provide (for a simple example, if you do your own taxes, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.

A multiple of salary? Many advisors recommend buying life insurance equal to a multiple of your salary. For example, one financial advice columnist recommends buying insurance equal to 20 times your salary before taxes. She chose 20 because, if the benefit is invested in bonds that pay 5 percent interest, it would produce an amount equal to your salary at death, so the survivors could live off the interest and wouldn't have to “invade” the principal. However, this simplistic formula implicitly assumes no inflation and assumes that one could assemble a bond portfolio that, after expenses, would provide a 5 percent interest stream every year. But assuming inflation is 3 percent per year, the purchasing power of a gross income of £25,000 would drop to about £19,300 in the 10th year. To avoid this income drop-off, the survivors would have to “invade” the principal each year. And if they did, they would run out of money in the 16th year. Speaking to a qualified and registered advisor is a must on this subject.

More information regarding Life Insurance

What are the principal types of life insurance?

How is life insurance sold?

You can buy life insurance either as an “individual” or as part of a “group” plan.