What is life insurance?
Life insurance is an insurance taken out on your life, so your family is protected financially. As with any form of insurance, you would generally pay a fee every month, or a lump sum every year.
The amount your insurance is worth is decided in advance – you would need to work out how much your family would need to be comfortable financially without you. In the event of your death, your family would then receive a cash sum.
Life insurance is not generally required by single individuals. It is a more useful for those co-habiting in a relationship, to ensure that your loved ones are not left financially burdened by your death.
What is life insurance used for?
Any amount paid out as life insurance can be used in whatever matter your loved one chooses. As every case is different, individuals will have different priorities. Some will need the insurance to go towards funeral costs, mortgage payments and household bills. Much depends on whether the remaining partner is in full time employment or has children and others to support.
How to calculate life insurance
The amount you will have to pay to be insured will depend on your own personal circumstances. Personal life choices can affect your premium, with factors such as your age, the state of your current health and whether you smoke taken into account.
An additional term you may come across is that of critical illness cover. This is generally an optional, additional payment on top of your life insurance. Critical illness cover offers an additional layer of financial security, and covers various long-term illnesses. With this additional cover you are often insured for disability also.
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