Life Insurance

Life insurance can be a very important consideration for most people who want to make sure that they have put measures in place to provide their loved ones with financial security in the event of their death. It can be a great way to make sure that your debts are paid off if you pass away, including things such as the remainder of your mortgage. It can also pay for your funeral and can help your family cover their everyday expenses.

Having said all of this, life insurance is not necessary a worthwhile investment for everybody. If you are somebody who does not have any financial dependants and you are single, you may not want to spend your money on something that will only yield benefits when you are no longer around to reap them. In a similar way if you have children but they are of an age where they can provide for themselves financial and no longer rely upon you for their wellbeing or accommodation, there may be no real need for you to commit to this financially.

There are many employers who offer what is referred to as a death-in-service benefit. This death-in-service benefit is a payment that your family will receive from the company that employs you, if you die whilst still being employed by them. This benefit will come in the form of a lump sum and normally equals about four times your yearly salary. This can sometimes be enough to help your family with the immediate financial burden that they will be placed under but you may want to take out some extra cover depending on what you need.

Term life insurance is the most commonly chosen form of policy and is the most affordable - when compared to life assurance. This works on the basis of deciding on a set period and covering you for that - this time period is what is referred to as the term. This means that if you agreed upon plan lasted for a 20-year term, you would be covered for that period and if you were to die, your family would receive a payout. Once the agreed upon term has finished, your cover will expire and your family will no longer receive a payout in the event of your death.

The answer to this question changes depending on the type of insurance policy that you take out. If you take out a level term insurance policy, the amount that you receive as a payout will stay the same no matter when you die - provided you die within the term of the policy.

You also have the option of taking out a decreasing term life insurance policy, these policies give a lower payout the longer that the policy goes on for. This means that if you were to die in the first year of your policy, your family could receive something like £150,000. If you were to die in the last year of your policy, your family would receive a much lower sum. The main reason that people take out decreasing term policies is to cover their outstanding debts in the event of their death. Things such as mortgages will be paid off as time passes and you move through the term therefore your family will need less money to finish its payment the later your insurance pays out.

This is question that purely depends on your own, personal situation. Some people decide to choose a term that will last until their children have reached the age of 18 whilst others choose a term that will go until their children have finished university. It really just comes down to what you want to get out of your life insurance plan. You should also take your age into account when making this decision as that will affect the amount that you pay for your policy.

Some people would like to choose a plan that will make a payout regardless of the time of their death. Fortunately, this is possible to achieve by taking out what is referred to as a whole of life assurance policy. This then means that the payout your family receives will not be dependent on when exactly you pass away. One thing to bear in mind if you do decide to go down this avenue is the fact that the cost of whole of life assurance is normally quite a lot higher than normal term life insurance.

The majority of life insurance plans offer what they refer to as "guaranteed" premiums, this means that the amount that you pay is fixed throughout the entirety of the plan and you don't need to worry about them changing unexpectedly. This is worth checking in the fine print before you sign up, because not all of them have "guaranteed" premiums. Some plans will have what is referred to as "reviewable" premiums, these reviews normally result in price rises since that you will be older than you were when the insurance plan started.

This is different if you were to take a whole of life assurance policy because normally your plan will be tied to an investment, if this investment does not do well, the provider can up the cost of your premiums.

The cost of different life insurance policies vary a lot depending on what form of plan you are taking out and also on how large you want the payout to be. As with all forms of insurance, providers are essentially betting against you making a claim. This means that if they view you as a higher risk candidate, they will charge you more for insurance than they would somebody who was at a lower risk. This means that if you are somebody who is in great physical shape and leads a healthy lifestyle, you can expect to pay slightly lower rates on your premium than somebody who is not. They also take age into account when deciding upon the cost of your plan, as a general rule the older you are the more expensive the plan will be however there are other factors taken into account. If you are a smoker, quitting will lower the rates that you need to pay.

Some people find it difficult to take out life insurance if they have already been diagnosed with a serious medical condition as there are many insurance companies who will not allow policies to these people. There are however some companies that will still allow you to take out an insurance policy at a higher premium. There are other companies that offer policies which exclude cover for the disease you have been diagnosed with but will cover you if you die from a cause that is unrelated to it. You should check with an insurance company directly to find out exactly what is covered by the policies they offer, this way you can find out if the plan is relevant to you or not before you sign up to it.

There is a general rule that applies to pricing in relation to age, and that is that the older you get the more expensive your premium will be. The reason for this is straightforward - that the older you are the shorter your life expectancy and therefore the likelihood is higher that you will pass away whilst on the plan.

However, age is not the only thing that your insurer will take into account. They will also consider things such as your general health and lifestyle so it is important to focus on these things especially if you are older and looking for an affordable policy. There are still a lot of insurers who will cover somebody over the age of 50 and some of them will even do this without requiring a medical first.

There are many couples who are now opting to take out what are known as joint life insurance policies that offer shared protection between partners. This offers the benefits of being less complicated because you are required to fill out half as much documentation. They are also considerably cheaper than the alternative of taking out two separate policies - one for each of the individuals. However, when considering one of these policies, it is important to remember that they work on a first death basis when it comes to paying out. This means that the policy will only payout on the first death out of the two policy holders. This will leave the second partner without cover and facing the prospect of higher premiums when taking out a new policy due to their increased age.

The payout that your family receive as the result of your life insurance will not be taxed by capital gains or income tax. However, there is a chance that it may fall under inheritance tax in some situations. This can be easily avoided if you make sure that when you are writing your policy it is written "in trust". Writing it up "in trust" allows the payout to go straight to your dependents without being in anyway affected by inheritance tax.

To work out how much cover you need you should work out exactly what you need it for. If you’re taking out a policy so that your dependants can pay off your mortgage when you die, then you should take out a decreasing term life insurance policy with the same value as your remaining mortgage debt.

Otherwise it’s worth trying to add up roughly what you spend regularly on behalf of your dependants. If your children are younger, then you’ll likely want to opt for more cover than if they’re older, when they’re more likely to be financially independent. Read our guide on family cover for further info.

This also depends on your reasons for taking out your cover. If your priority is to find a policy that will help your dependants cope with any debts you leave after you pass away, then you should time your policy accordingly. If the debts will be paid off within 10 years, you probably don’t need your policy to last much longer than that.

It might be the case that even when your debts are all paid off, your children might not be old enough to be fully financially independent. In this case, you might want to extend the term of your life cover until they are. If you have very young children, then you may want to get a considerably longer term than somebody who has children who are already in their 20s.