Life insurance for single person

Reasons include:

To help pay for your funeral

Regardless of your age or relationship status, having life insurance in place to cover the cost of your funeral could bring some comfort for you and your loved ones.

These days, even a simple funeral can cost thousands of pounds (average cost of a funeral is £4,141) which is a financial burden many of us wouldn’t want to leave behind.

If you’re a single person over 50, then you may consider an over 50s plan to help cover your funeral costs (acceptance is guaranteed to people aged 50 - 85).

To help pay off your mortgage

Life insurance is commonly taken out to help protect a mortgage. You could arrange policy which is designed to clear your mortgage in the event of your death. This can help to take care of any outstanding debt for whoever inherits your home.

Life insurance may be even more important if you’re one of the many people who’s bought a property with a friend or relative. Should you pass away unexpectedly, the pay out from the policy will help them to cover your half of the mortgage so they could remain in their home.

It’s sensible to compare multiple quotes for mortgage life insurance, even if you’ve been offered a policy through your mortgage lender (as usually they don’t provide the best rates).

To leave an inheritance

You may not need to protect the financial future of a partner or children, but you may want to leave a cash gift to a special friend, relative or charity after you’re gone. The pay out from your life insurance policy can help to provide an inheritance to whoever you wish.

If you intend to leave some money behind to a beneficiary, then you may consider writing your policy in trust. This can help to avoid or minimise inheritance tax (IHT) which may apply to the pay out sum and ensures that the funds are distributed according to your wishes.

We discuss the benefits of writing your life insurance in trust in more detail below.

To lock-in the lowest life insurance rates

Young and healthy singletons can secure the cheapest premiums available. If you’re in your teens, 20s or even 30s, you may not have huge financial responsibilities now, but is this likely to change?

As a young single person, you could take advantage of lower premiums today (whilst you can), on the assumption that you’ll buy a home, get married or have kids in the future.

If you do settle down at some point and find that your existing policy is no longer sufficient for your needs, then you could secure additional cover.

This can be done by taking out a new policy, or by increasing the pay out amount on your existing policy (only possible with some policies, this is known as the special events option or guaranteed insurability option).

We have an extensive article on life insurance for young adults if you’d like more information »

Not many people are aware of the benefits of writing life insurance in trust. The main advantages include:

• Avoid or minimise 40% inheritance tax 
  Life insurance is subject to inheritance tax (40%) if the value of your estate exceeds the tax-free threshold of £325,000. If your policy is written in trust, then this could detach it from your estate – avoiding the tax bill and ensuring your loved ones receive a full pay out
• Avoid the probate process (faster pay out)
  If your policy is written in trust and gets legally detached from your estate, then it doesn’t need to go through probate (the lengthy process of dealing with your estate after you’re gone). Your loved ones will receive the money within a few weeks, instead of after many months
• More control over the pay out
  Putting your policy in trust will ensure that the pay out is received by your named beneficiaries (and not by anyone else). This is especially important if you’re unmarried and you intend for the money to go to your children or another relative. Having a trust also allows you to decide when and how the funds are distributed, of which the trustee will manage after you’re gone

If you’re recently single after a divorce and have an existing joint policy with your ex-spouse, then there’s usually three options:

1. You may be able to split the policy into two single policies - providing that your terms and conditions include a ‘separation benefit’ add on (not all insurers will offer this option)
2. One partner takes over the policy as the sole policyholder (again, not all insurers will offer this option)
3. The joint policy is cancelled, and you both take out two new single policies

In another circumstance, if you and your ex-spouse had a single life insurance policy each, then you may consider:

• Changing the beneficiary on your policy if this is your ex-partner
• Checking that the amount of cover you have will suit your change in circumstances

We have written a dedicated joint life insurance after divorce article if you require more information »