If you have decided now is the time to protect your familyís future by investing in life insurance, you may be confused as to which policy to opt for.
Take a look at this guide which explains the importance of life insurance, what types of cover are available and how to choose the best one for you.
Why do I need Life Cover?
Life cover can protect your family should you die. If you are the main earner in the family this is particularly important, as life insurance can cover mortgage repayments or even provide a replacement to your salary so your family are not burdened by bills they cannot afford.
Life insurance can also protect your childrenís future and go towards their education, or childcare costs.
What is Life Insurance?
Life insurance covers a personís financial obligations after their death, so their family or dependents are looked after when they are unable to do so.
The amount of money the family will receive depends on the policy and what the policy holder opted for when choosing the insurance cover. This is why finding the right level of life insurance for your needs is so important.
There are different types of life insurance, and outside that there is critical illness cover and mortgage protection insurance.
Critical illness cover protects a personís salary should they be diagnosed with a critical illness or disability and be unable to work. While mortgage protection insurance covers mortgage repayments should the main policy holder die.
There are also types of life insurance which can help your loved ones pay for funeral expenses, such as over-50s life insurance. Term policies on the other hand are more expensive policies ñ but with this type of insurance the policy holder is protected for the whole of their life.
Choosing Life Insurance
The type of life insurance you require and the reasons for applying for it will determine how much your premiums will be.
The majority of life insurance providers will conduct a health test before giving you a quote; this is to determine when you are likely to claim on the insurance in the future. Therefore, the healthier you are, and usually the younger you are, the cheaper your premiums will be.
Also, if you are taking out a mortgage, the cost of your life insurance will reflect the size of your mortgage, as a large mortgage will mean the insurance company would have to pay out more should you be unable to do so. However, with most policies as your mortgage gets smaller throughout the term, so should your mortgage protection insurance premiums.
The way your family will receive the payout is also something to consider. With an insurance policy on your mortgage they will typically receive a lump sum to cover the mortgage. While a family income benefit will see your family receive regular payments to cover their everyday expenses for the duration of the policy.
Another alternative to life insurance, or in addition to it, is having a savings pots put aside for any unexpected life events, such as illness or death.
A long term savings account or an equity ISA could provide the best rate of interest on your savings, and with the later, all the returns you receive are tax free.