Life Insurance - The Options
Life insurance is not a topic that people often want to think about because of the morbid nature of the subject. In spite of this, life insurance is a great way to make sure that your loved ones are provided for when you're no longer around. If you have people who are financially dependent on you, then you might want to consider looking into a life insurance plan. With so many options available to you it can often be hard to decide which plan is the right one for you.
Here are some of the different types of insurance plan that are out there:
In this guide:
The main reason that people get life insurance is to make sure that in the event of their death their family is financially secure. A good life insurance policy can provide this and more. If you have any outstanding debts such as a mortgage, then you can use a life insurance policy to pay these off when you die. This allows you to make sure that your family can remain in the property without being crippled by the financial burden of your repayments.
Term insurance is one of the two main forms of life insurance policy. This type of policy is normally the cheapest and most simple to take out. It is called term insurance because it is taken out over an agreed period of time that is referred to as a term. If you pass away during this term, your dependents will receive a payout. Once the term is complete the policy expires, then you can either renew it or start a new policy.
Term insurance normally has fixed premiums that do not change over time. This means that it will be easier for you to manage your payments as they will not go up or down unexpectedly. It is important that you keep on top of your payments because if you don't you run the risk of losing the money that you have paid into the scheme.
Level term insurance is one of the main types of term insurance. It refers to insurance policies that hold the same payout at any point during the agreed upon term. This means that if you take out a 10 year plan that has a level payout of £100,000, this payout will be the same whether you die in the first year or the last year of the policy.
This is different from decreasing term life insurance. With decreasing term life insurance the payout gets continuously smaller as the policy goes on. This is normally used to pay off existing debts and works on the assumption that the amount of debt would go down over time. The payments on these types of plans are fixed at a set rate that will not change but the cost of these plans is normally smaller than level term insurance.
When your life insurance policy pays out you can decide whether or not you would like the payment to be given as one lump sum or as a regular income. If you decide that you like to have a payout in the form of an income, this could well be easier for your family to manage than one lump sum.
These types of family income policies are often cheaper than other forms of insurance because there is a chance that the insurance company will have to pay out as much. The reason for this is that if you take out a twenty-year policy that will pay out £60,000 per year and you die after 18 years, the insurance company will only have to pay out for two years.
Whole of Life Insurance
This type of life insurance is also referred to as life assurance and it is one of the most expensive types of insurance. This form of plan will cover you for the time you take out the plan until the day of your death. It is for this reason that it is known as life assurance because you are "assured" a payout. This is also why it can be so expensive.