Wednesday wisdom: Life insurance advice

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When an adult member of a family dies, on top of the grief, there can be the added burden of struggling financially. If your family’s lifestyle is wholly or partly dependent on your salary, then life insurance can ensure that your family remains financially secure.

Why don’t people have life insurance?

Although life insurance makes sense, the website ThisIsMoney reported in 2016 that a quarter of wage earners have no life insurance.

Perhaps one of the main reasons why people do not take out life insurance is because they are focused on their day-to-day money issues, and do not think too far ahead. Or maybe people are afraid of death and do not want to think about what would happen to their dependents if they died.

If you do not consider this issue, your family is at risk and may struggle if you are not there.

Not just for wage earners

Many people think that if they do not earn a wage then they do not need life insurance, but if you are a stay at home parent, your death could have financial implications. There may be extra childcare costs, or it could be that the partner who is working would need to leave work to look after the children.

Types of life insurance

Once you have decided that life insurance is essential to protect your family, there are a number of options to choose from

Term insurance covers you for a fixed period of time, which could be 10, 25 or more years. At the end of this period, the policy runs out and you will no longer be covered.

Term insurance can pay out a fixed sum when you die, or it could be a sum that decreases over time.

One of the reasons for taking out a decreasing policy is to cover the mortgage, which is normally a household’s largest debt. You can buy a policy that terminates at the end of your mortgage period. The amount insured decreases in line with the outstanding mortgage debt. This makes sure that in the event of your death, the mortgage will be paid off and there is no danger of your loved ones losing the family home.

Alternately, you can take out whole life insurance that only terminates when you die.

What does life insurance cost?

The cost of a life insurance policy is dependent on many factors, such as your age, your occupation and the sum insured. Non-smokers pay less than smokers.

Men used to pay more for life insurance than women, but now policies are the same for all genders.
Premiums can remain fixed or they can be reviewed periodically, and may go up.

Whole life insurance is more expensive than term insurance.

Further help

There are a lot of decisions to make when choosing a life insurance policy. To make your choices easier, talk to Ascot Mortgages, where a friendly adviser can discuss all your life insurance options and then find a policy to suit your individual circumstances.

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