Life insurance can give you much needed peace of mind when it comes to protecting your family’s financial security should the worst ever happen to you but finding the right policy can be time consuming as you look through the different types of life insurance.
What is life insurance?
Life insurance policies pay out a lump sum (known as the ‘sum insured’) when the policyholder passes away. There are several different types of policy and the right one for you will depend on a number of different things, for example:
How much cover you need?
Whether you want the sum insured to cover a specific debt (like a mortgage)
How much you can afford to pay in premiums each month
How does life insurance work?
Life Cover Policies work in different ways depending on the plan you have. Broadly speaking, there are two main types of life insurance – term and whole-of-life policies.
Term policies cover you for a fixed length of time (known as the policy term)
Level term cover where the amount of cover is also fixed so it doesn’t matter when you pass away, as long as you do so within the policy term, the amount of money paid out is the same.
Decreasing term where the amount of cover gets smaller in time, usually in line with a specific debt (like a mortgage or car loan). For example, if you had a 25-year plan then your dependents would receive more money if you passed away in year five than they would if you died in year 20.
Other types of term policy are available and you may find they suit your needs better.
In contrast, whole-of-life policies have no fixed term and cover you for the entirety of your life. As you’d expect, these policies tend to be more expensive than term cover because there is no policy end date.
They do, however, guarantee beneficiaries a lump sum payment when you pass away (subject to any conditions set out in your policy).
Do I need life insurance?
If anyone relies on you financially, then life insurance is definitely worth considering.
Leaving a lump sum payment means loved ones could pay off the mortgage and stay in the family home – easing their financial burden at a time of grief.
When should I get life insurance?
If you don’t have dependents, aren’t wanting to leave your property to anyone or don’t have a mortgage, then you may want to consider a policy to cover the cost of a funeral as funeral costs are rising.
With that in mind, it’s worth knowing that life insurance becomes more expensive as you get older because of the associated decline in health.
So while buying a policy in your twenties might feel premature. it can be far more cost-effective than buying one in your forties.
Family Protection
On the whole, family or personal life insurance is simply another way of describing a life insurance policy that you’ve taken out to benefit your loved ones.
Other policies that are specifically aimed at families include something called Family Income Benefit (FIB).
These are usually sold as term policies but are slightly different in the sense that they pay out regular instalments to your loved ones rather than a lump sum payment.
Mortgage Protection
Mortgage life insurance is a policy that covers the cost of your remaining mortgage loan.
One of the main types of mortgage life insurance is decreasing term cover reducing your monthly premium in line with the cost of your mortgage.
Decreasing term policies are only suitable if you have a repayment mortgage as the amount you owe gets smaller in time (as does the sum insured).
Critical Illness Cover
Critical Illness Cover or known as CIC is a policy that will cover you and pay out the sum assured if you are diagnosed with a critical illness.
This helps as most Critical Illness will prevent you from being able to work so the sum assured will help you financially during a difficult time.
Over 50s Plans
As the name suggests, you need to be at least 50 to buy an over 50s plan.
They work in a similar way to other life insurance products as they pay out in the event of your death but they do have some key differences:
Guaranteed acceptance no matter what your lifestyle and state of health is and there is no medical.
Guaranteed payout when you pass away whereas claims for life insurance will need to meet all the policy conditions.
Fixed premiums for the length of the policy which can be good for budgeting.
Find out more about life insurance
When it comes to life insurance, there’s a lot to think about and it’s well worth considering all the options to ensure you find the policy that best meets your needs.
We offer our protection services on an advised basis which ensures that all our advisers are fully trained regularly with the up to date changes in the market.
We're ask a few 'Get To Know You' questions. We need to find out about you, so that we can tailor a policy exactly for you.
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