Do You Need Life Insurance If You Already Have Savings?

If you’ve worked hard to build up your savings, other forms of protection like life insurance may not seem even necessary. After all, you’ve got money set aside, and there’s no glaring financial gap staring you down. So, do you still need life cover?

The answer often depends on your situation, your goals, and who might be affected if something were to happen to you. Savings can go a long way, but they might not stretch as far as you think once life takes an unexpected turn.

Can savings replace life insurance?

In some cases, maybe. If you’ve got no dependents, no debt, and enough money tucked away to cover your funeral, then savings might cover the basics. But that’s not necessarily a given.

For most people, savings on their own aren’t enough to fully replace what life insurance offers. That’s because life cover isn’t just about what you leave behind; it’s about who needs to carry on after you’re gone and how they’ll manage without your support.

Why relying on savings might not be enough

Savings take time to build, but can disappear quickly

One medical emergency, accident, or unexpected event could wipe out hundreds, even thousands, overnight. If you pass away, the same savings might have to cover funeral costs, outstanding debts, childcare, and ongoing living expenses. It’s a lot to ask for one pot of money.

You can’t predict when life will change

You might be healthy today, but things shift. If you die earlier than expected, your savings might not have had enough time to grow to the level needed. Life insurance bridges that gap, it’s there even if you haven’t hit all your financial goals yet.

Savings don’t usually grow on autopilot

Unless your money is invested and growing consistently, it’s likely sitting in a low-interest account. That means it might not keep pace with inflation or future needs. Life insurance, in contrast, guarantees a lump sum when it’s needed most.

Why you might need life insurance

Here’s when adding family life insurance to your financial plan makes sense, even if your savings are healthy:

• You have a partner, children, or ageing parents who rely on you

• You’ve got a mortgage or outstanding loans

• You want to make sure funeral expenses and legal fees are covered

• You’re planning to leave money to loved ones or a charity

• You don’t want savings to be completely drained by unexpected costs

Even a small policy could make a huge difference to the people left behind. And it means they won’t have to touch your savings during a time when emotions are already running high.

When you might not need it

On the other hand, if you’re debt-free, have no financial dependents, and your savings comfortably cover your funeral and estate administration, then you may be in the rare group that doesn’t need it.

Still, it’s worth checking that your money would be accessible quickly. Life insurance pays out relatively fast. Savings tied up in property, investments, or frozen accounts after death can take time to access.

Types of life insurance to consider

If you’re thinking about getting covered, here’s a quick breakdown of the main types:

• Term life insurance – Lasts for a fixed period (e.g. 20 years). It pays out if you die during the term. Good for covering a mortgage or supporting children until they’re financially independent.

• Whole life insurance (also known as life assurance) – Lasts your entire life so long as you continue to pay the premiums. Guaranteed payout whenever you die, but it’s more expensive. Often used for funeral costs or inheritance planning.

• Decreasing term insurance – The payout reduces over time, usually in line with your mortgage. It’s cheaper and works well if you just want to clear debt.

• Joint life insurance – Covers two people, usually with a single payout on the first or second death. Popular with couples.

How much does life insurance cost?

It’s more affordable than most people expect. For someone in their 30s, a basic policy could cost as little as £5 to £15 per month.

The cost depends on a few key factors:

• Age – Younger people get cheaper rates.

• Health – If you have existing medical conditions, your premium might be higher.

• Smoker status – Life insurance for smokers tends to cost significantly more.

• Amount of cover – Bigger payouts mean higher premiums.

• Length of policy – Longer terms cost more, but offer longer protection.

• Type of policy – Whole life tends to be pricier than term insurance.

Getting a quote is usually quick and can help you see what’s realistic for your budget.

So, do you need it?

If you’ve already got savings, you’re in a good place. But think of life insurance as an added layer, something to protect your savings instead of replacing them. It keeps your plans on track even if something goes wrong.

You don’t have to choose one or the other. Often, the best approach is to have both: savings for what you expect, insurance for what you can’t.