Life insurance isn’t suitable for everybody. But if people depend on your income to cover the mortgage or other living expenses, then you should probably consider taking out life insurance, as it may help provide financial stability for your family in the event of your death.
A life insurance policy pays out either a lump sum or regular payments to your dependants in the event of your death. Life insurance only covers death, although there are other insurance products which can cover things such critical illness insurance.
The amount paid out for Life Insurance depends on the type of cover you buy. You can decide the amount that is paid out and what costs it will cover eg. Mortgage repayments, with such choices defining the monthly cost to take out the policy
Term life – the policy is valid for a fixed period (the term of your policy) This type of policy only pays out if you die during that fixed period. No lump sum is paid at the end of the term.
Whole life – This policy will pay out whenever you die as long you keep making the premium payments.
You can opt to have your life insurance paid out as a lump sum or in regular pay instalments. It is designed to reassure you that if you’re no longer there to provide, your dependents will still be financially secure. The amount paid out depends on the level of cover you purchase. You can also choose to have the Life insurance cover specific outgoings left behind for your dependents, such as mortgage payments.
Most Life Insurance policies have some exclusions or which are not covered. A person's lifestyle, for example, may create certain restrictions on the kind of policy they can take out, such as taking part in high risk sports, or if the policyholder passes away due to drug or alcohol abuse then the policy may not pay out. Other insurance products are available to cover you for other issues, such as long term or critical illnesses and total and permanent disability.
If you have dependants – such as children who are still in education, you earn an income which your partner relies on or you are responsible for any mortgage repayments, You may want to consider a policy which also covers funeral expenses.
Relying on the government to take care of your family may leave them in financial difficulty– the money they would get from the state is lower than you’d probably expect. If you want to ensure your family is provided for if you die, life insurance is essential.
You can get life insurance which provides financial protection for your loved ones for as little as a few pence a day (this depends on your age and health).
Monthly payments (or premiums) vary, so comparing different policies and different levels of cover will give you a good understanding of what each level of cover costs
The cost of your life insurance policy is dependent on a number of factors. Including:
If your employee package includes ‘death in service’ benefits, this will pay out a multiple of your salary so additional life insurance may not be needed. You will have to work out whether this policy covers all your needs and if you require an additional life insurance policy. Remember that you won’t be covered if you stop working for that employer.