What is life insurance?
At its simplest, life insurance is designed to pay out a sum of money to your loved ones in the event you die. This is to give you peace of mind that basics such as your mortgage, child care costs and even funeral expenses, are taken care of when you’re not around.
What types of life insurance are available?
Although it can appear confusing at first, broadly speaking there are two main types of life insurance cover:
Level-Term insurance which means your cover is for a particular period of time (5,10,15 years etc.) If something was to happen after this time, then you wouldn’t be covered by the policy.
Decreasing cover insurance which is designed for people whose protection needs will decrease over time. For example, if you are paying off your mortgage, the amount you owe on that mortgage will decrease. So the cover amount you might need in the event of your death, will reduce.
Which life insurance cover is right for me?
When it comes to life insurance policies, you’ll have some of the following to choose from:
Level-Term, which will leave a lump sum in the event of your death. Commonly chosen by those looking to provide protection for things such as child care costs which importantly could help maintain your loved ones lifestyle.
Critical illness cover, which can be chosen in addition to regular life insurance and can help your family handle additional costs. Such as mortgage payments and household bills if you’re not being paid due to being diagnosed with a critical illness.
Joint life policies, which could be a good idea for couples who share financial commitments. These can be cheaper than two separate policies. However, it’s worth remembering that these policies end once the first partner passes away.
Over 50s plans, these tend to offer a smaller payout to cover things such as funeral expenses, but the premium is guaranteed for life. These usually won’t require a medical as most are calculated on a statistical risk.
Who should think about getting life insurance?
Less than a third of adults with children in the UK have life insurance (just 1 in 5 families). Those with loans, mortgages and financial dependents should consider getting a policy. Although it’s common to get a new policy after a major life event (new baby, moving house), it might be a good idea to buy when you’re young and healthy as the premiums could be lower.
If you’re a home owner, your policy isn’t tied to your mortgage, so it’s still worth comparing your options to see if you can save on an existing policy.