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What exactly is life insurance, and what can it do for me?
A life insurance policy provides financial protection for your family in the event of your death. By paying a monthly premium over an agreed term, your life insurance provider will pay out a cash sum to your chosen beneficiary that can contribute toward your funeral expenses, outstanding mortgage payments and other financial obligations.
What will I be covered for?
A typical life insurance policy will cover you in the event of natural and accidental death but most major providers now include additional features to make their products more marketable. One of the most common policy additions is terminal life cover, which provides a cash settlement to your family if you are incapacitated through heart disease, cancer and other qualifying conditions. In most cases, you will need to have a life expectancy of twelve months or less before a payout is made.
Who can apply for a life insurance policy?
Typically, you will have to be a resident within the United Kingdom at the time of application, and be over eighteen years of age. Life insurance can be purchased on an individual basis, but you are more likely to find a preferable deal if a partner or spouse is underwritten as well.
What can I expect to pay for life insurance?
It’s not uncommon for consumers to avoid a life insurance purchase on a basis of price but in most cases, they fail to realise how affordable a policy can be. If you are in a state of good health, a non-smoker and only an occasional drinker, premiums can be as low as £6 per month. This equates to just 20p every day, and represents superb value for money.
How much life insurance will I need to purchase?
Obviously, this will depend on your personal circumstances but it’s advisable to take out enough protection to cover all of your outstanding debts, including your mortgage, and any other financial commitments. If you propose to leave a lump cash sum to your children or another beneficiary, you will need to purchase additional levels of life insurance.
Will I get any money back if I survive the term of my life insurance policy?
Possibly, but most life insurance companies specialise in life assurance only so the likelihood of receiving a payout when a policy expires is minimal. It is also important to note that most life insurance providers won’t offer a cash-in option during the term of the policy.
What is term insurance?
Term insurance is an economical way of insuring your life. There are two main types – Level Term and Decreasing Term.
Level Term life insurance is a policy that pays out a lump sum in the event of the death of the policyholder during the term in which the policy runs. Level term policies have fixed-cost premiums and are used for long-term planning because premiums stay the same and so it allows one to budget over several years.
Decreasing Term policies are often called mortgage protection insurance. They are usually level premium, declining benefit policies. They suit repayment mortgages or loans that have a decreasing amount so that the remainder of the mortgage will be paid if the insured person dies.
What is critical illness cover?
Critical illness cover insurance policies pay a lump sum if the insured is diagnosed with a specified critical illness. This sum is paid directly to the insured regardless of any other sources of income.
How is this different to whole of life assurance?