Life insurance means your dependants will receive money upon your death that could make the difference between struggling financially and having enough money to continue funding the lifestyle they are used to.
For most people, taking out life insurance makes sense yet many people put off putting life insurance in place. It’s natural that people do not want to think about their death and the effect this would have on their loved ones. Grief over death will be difficult to cope with for your dependants without the added pressure of being financially insecure or uncertain of their new future.
Now is most likely the best time to buy life insurance if you do not already have a policy, because in most cases, the younger you are when you put it in place and before you may find new health problems, the cheaper it can be. There are a number of options to consider when choosing life insurance:
Term life insurance
Term life insurance is designed to cover the policyholder for a defined period of time. The majority of term policies run from 10 to 25 years. If your death occurs within this period, then the policy will pay out.
If you survive beyond the defined term, then the policy simply ends.
Term life insurance is suitable if you have debts that are for a fixed period. If your mortgage has 10 years left, then you could take out term life insurance for 10 years. You may have a loan or credit card debts that you expect to have paid off within a known period.
Whole life cover
Whole life cover pays out when you die. Unlike term life insurance, the only termination date is when you die so a payout is guaranteed. Therefore, the term for this is ‘life assurance’ because you are assured a payout.
The sum paid
The amount that the life insurance policy pays varies; you decide on the sum. Naturally, the higher the sum, the higher the premiums will be. The amount covered should normally be a sum that will enable your family to continue to pay the household bills and maintain their normal lifestyle, or you can choose what you can afford to cover right now and review it later.
You can choose decreasing cover where the sum paid out decreases each year. This is usually done to cover paying off a mortgage whose outstanding amount owed decreases over time.
What is covered?
Life insurance policies are there to pay out money when you die. Some life insurance policies will not pay out for the first year that the policy runs. Some policies have the option to pay out if you are diagnosed with a critical illness. Joint policies can cover both partners.
As well as life insurance, you should also consider taking out mortgage protection insurance, income protection and critical illness cover. These policies cover you when you are alive but unable to work through illness or accident.
The cost
The cost of a life insurance policy varies depending on how much it pays out, your age and current health. Smokers will be expected to pay more.
Where to buy life insurance
A broker is the best place to purchase life insurance. Talk to Ascot mortgages today about your life insurance needs. We will clearly explain all your options and then find the best policy to suit your lifestyle.
