Choosing a policy
When deciding on a suitable life insurance policy, you will first have to work out how much money you need the policy to pay out in order to protect your dependants. Taking into account living costs, outstanding debts e.g. mortgage.
Choosing the right type of life insurance
Level Term Insurance
A level term insurance policy will last for a pre-agreed period of time, and will pay out a set amount if you were to die during the term of your policy. It can be used to cover fixed debts such as interest mortgages or provide your family with a lump sum of money.
Decreasing Term Insurance (or mortgage protection)
Again, this policy lasts for a pre–agreed term, which usually matches your mortgage, and will pay out if you die during that time. The pay-out amount decreases each year that passes, in line with your mortgage debt. This makes the policy cheaper than level term insurance, and still pays out if you die during that time.
Family Income Benefit Insurance
A family income benefit insurance policy is similar to the two discussed above, except instead of a lump sum it is paid out in regular instalments like an income for the remainder of the term. This policy should be considered if you have dependants who are likely to be left in financial difficulty if the main earner dies.
This policy provides cover for the rest of your life, there will be a pay-out whenever you die. Your policy covers you for the rest of your life so your dependants get a pay-out no matter when you die. Therefore, this type of policy is usually more expensive than set – term policies. This policy is often taken out in order to provide money to cover funeral expenses or inheritance tax planning.
Joint Life Policies
‘Joint life’ policies cover two people; you can decide whether it pays out when the first or second person dies however it only pays out once. Therefore, if you choose the policy to pay out after the first person’s death then the other person will no longer be covered and no further pay-out will be in place.
When deciding whether to take out a joint policy, consider each person’s cover needs, and assess what you need the money to cover. These may differ depending on your ages and family circumstances.
Policies are generally more expensive if you are older and have any health conditions therefore it may increase your premiums if you were to take out a joint policy with someone who is older and has health problems. would you benefit from separate policies that have different level of cover? Check to see if either of you have a death in service benefit with work, if so you may only need one additional policy.
If you change your mind
You have a 30-day period in which you have the right to change your mind on your policy.