What do I need life insurance for?
Taking out a life insurance policy can benefit those you leave behind in many ways, which is why it’s important to decide on what you want to cover when you are no longer here.
There is no set/correct age to take out a life insurance policy, but there are many trigger milestones in our lives which could encourage us to sign up for a policy.
Buying a new home: When you buy a home, you are signing up to a commitment for a substantial amount of time. A life insurance pay-out could allow your partner or family to pay off the mortgage after your death, allowing peace of mind for both you and your family.
Starting a family: Once you start your own family, or if you have members of family you wish to take care of when you are no longer here, you can look at policies which will enable a large lump sum of money to be paid out. Inheritance will allow peace of mind to those family members who are important to you.
Funeral expenses: If you do not already have separate cover in place for funeral expenses, your life insurance policy could provide a lump sum payment allowing your family to use the funds to cover funeral costs.
Large amount of personal debt: In some circumstances, your life insurance policy could go towards unpaid personal debts being paid off once you are no longer here. It could be the debts are in joint names and you wish to clear them to support your partner in the future. Alternatively, if there are no nominated named beneficiaries, the proceeds of the life insurance policy may form part of your estate and be used to pay off the outstanding debts.
All policies have different terms depending on the provider and the type of policy taken out. Before signing up to any policy, ensure you have a clear plan for what you want from the policy. Switching policies, if your circumstances or wishes change, is doable - however, not only will this be more expensive, but you may also not be eligible for certain policies depending on your own personal circumstances.
Working out how much cover to take out
When you first research into life insurance policies, there are so many different types that it can be difficult to know where to start. This is where we can help. Our experienced advisers can help you decide on the level of cover that is right for you. We take care in listening to your current circumstances and the expectations that you have, in order to find a policy that suits your requirements and offers benefits which meet your needs.
The amount of cover that is taken will also dictate the cost of the overall policy too. This is an important factor to consider when working out your finances and monthly affordability.
Policy durations and types
There are a number of different policies available which could suit the needs of you and your family, ensuring that in the event of your death - those you care for are looked after.
Whole of life cover: As the policy name suggests, this type of policy covers you and your dependants for the duration of your life, irrespective of how long that is. As this type of policy has no specific end date, it can be more expensive than those which are for a smaller or nominated amount of time.
Term insurance: Term assurance guarantees a payment to your nominated beneficiaries if you pass away within a specific period. Deciding time frames is not always easy, as we cannot plan ahead. However, if you have specific financial commitments such as a mortgage, the policy can be applied throughout the term.
Other reasons for considering term assurance could be while you have children living at home, until they reach a specific age or are able to be independent. The sum paid at the end of the policy would remain the same amount, no matter how far or how early on into the agreed policy term.
Decreasing/increasing term insurance: As the policy names suggest, these two different types have time frames which change throughout the term depending on the agreed circumstances.
Decreasing term insurance is an option for those who are satisfied with the potential reduction of the final pay-out year after year. This can be an option for when payment terms slowly reduce over time, or when those who are dependent on the policy holder are old enough to become independent themselves. As the overall final pay reduces the longer the policy goes on, a decreasing term policy naturally can come out at a lower cost overall.
The alternative option is an increasing term insurance, which is where the potential pay-out rises ever year. This could reflect inflation rates or planned changes in circumstances as time goes on. This policy offers options of a fixed percentage rise every year or the option to increase in-line with Retail or Consumer Price Index. As the pay-out with this policy rises every year, the monthly or annual cost of this policy will be much higher than others.
Renewable term insurance: A renewable term insurance policy allows the originally agreed period of cover to be adjusted when required, without having to re-qualify or submit information such as health or circumstances. This agreement is dependent on policy payments being up to date, as well as a renewal premium being paid before the extension of the original term.
Over 50’s life insurance: As we get older, the majority of things do become more expensive – much to our dislike. There are some providers which specifically have policies designed for those who have reached a certain age, regardless of the current health or lifestyle that you have. Pay-outs can be guaranteed, so long as the original criteria – your age – is met, along with keeping premiums up to date.
Amongst the policies which are available to you, the majority of the policies also enable an option to take out joint life insurance. This means both you and your partner have the opportunity to be covered together on the same policy.
All policies will appeal to us in different ways. So, before deciding on which one is best suited for protecting yourself and your family - be sure to take time to research each one.
Things to consider
There are many factors which have an impact on the cost of your life insurance. These can include policy terms and inclusions, but a major contributing factor is ourselves. Our age, health, lifestyle and even family medical history will influence the cost of our cover. Your job role and hobbies are also factored into your life insurance cost. If you have a job role or hobby which is considered hazardous, then expect a potential rise in the cost of your policy.
The majority of households usually opt for the main earner to take out life insurance. That being said, there can also be a financial impact if there is more than one income coming into the household. Also, if only one member of the household does provide an income, but there are children at home - childcare costs that may not have previously applied might now be an additional expense to consider. Therefore, a financial difference could be ahead for a household with only one adult covered.
It is important to look at all scenarios and situations while deciding which life insurance policy is best suited for you.
How Choice Mortgages can help
It is important to us that you and your family have adequate protection. When you lose a partner or loved one, you should be able to grieve without any added financial worry. Having the appropriate life insurance will give you peace of mind in knowing that your family will be looked after.
We understand the insurance market and that one product does not fit all; insurance should be specific to you. We take time to listen to your needs, adapt our recommendations to fit your budget, and finally, when you’re ready, help you complete your life insurance application.
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