Planning for the future and protecting your loved ones should always be a top priority. Whether you’re young or nearing retirement, having life insurance can provide financial security for you and your family.
Though life insurance cover can be overlooked, it’s a crucial investment that can protect your loved ones in the event of your death. It offers a financial safety net that can cover funeral expenses, pay off debts, replace lost income, and even fund your children’s education.
In this article, we’ll explore the need for life insurance further.
What is Life Insurance?
Life insurance policies provide a financial payout when the policyholder dies. The beneficiary – usually a spouse, partner or child – receives a sum of money to help manage any expenses or debts incurred by the deceased.
Benefits of Life Insurance!
No matter what stage of life you are in, life insurance can provide some benefits for your family, including:
- Financial security: Policies can help shield your family from financial hardship. They can cover funeral expenses, replace lost income, and pay off any outstanding debts.
- Peace of mind: Knowing that your loved ones will be financially secure after your death, easing any worries about the future.
- Flexible cover: Policies can be tailored to meet your specific requirements and budget, giving you more control over the level of cover you require.
- Mortgage protection: If you have a mortgage, life insurance can be used to ensure that your family can keep their home if something were to happen to you. Without life insurance, the mortgage would still need to be paid off from other assets or income.
When to Buy Life Insurance?
Life cover is an essential part of any financial plan, no matter your age or stage in life. It can provide a valuable safety net for your family, and help ensure that they’re cared for should the worst occur.
1. Getting Married
Getting married is an exciting and life-changing event, but it also marks an important time to review your finances. Having protection in place can reduce any financial burdens your spouse may face.
Joint life insurance is one type of cover that is ideal for couples. It pays out one lump sum to your partner when either of you dies, providing ongoing financial security. It may also be cheaper than buying two separate policies.
2. Starting a Family
Having children is another major life event, and it also presents an opportunity to re-evaluate your policy. If you have dependents, it’s important to make sure you can provide for them in the event of your death.
Having a policy can be an immense weight off your shoulders, knowing your family will be safe in your absence.
3. Buying a House
Buying your very own home is one of life’s most exciting milestones, but it also brings with it a lot of responsibility. Nobody wants to put their family home at risk, that’s where life insurance can be a valuable asset.
Decreasing term life insurance is a popular type of policy for homeowners. The payout amount decreases over time, in line with the mortgage balance, ensuring that your family will still be able to pay off any outstanding debt if you’re no longer around to help.
4. Nearing Retirement
Even in retirement, life insurance can be a helpful investment. It can provide financial support for your loved ones if you die before retirement age.
Whole life insurance is a type of policy that pays out a lump sum when you die, no matter when that might be.
5. Owning a Business
Owning a business is a major commitment, but it’s also an incredible opportunity to leave a legacy for your family. Life or illness insurance can be an invaluable asset that can help protect your company should anything happen to you.
Critical illness cover is a type of policy designed specifically for businesses. It provides a lump sum if you become critically ill, injured or disabled. In this event, you’ll have financial support to fall back on.
Types of Life Insurance Policies!
When considering life insurance, it’s important to understand the different policies available. Here is a brief overview of the main types:
Whole of Life Policies
Whole life insurance can provide financial support for your family, no matter when you pass away. The policy pays out a lump sum in the event of your death, which can help your family cover any expenses or debts that may arise.
While whole of life policies provide peace of mind, they usually come with a higher premium since they guarantee a payout.
Term Life Policies
Term life insurance is generally more affordable than whole, and they provide financial security for a set period. This policy pays out a lump sum to your family if you die within the specified term.
It makes them ideal for those with dependents or financial obligations that need to be covered over a certain period.
There are 3 types of term life cover:
- Level term – pays out a fixed sum when you die. It also has fixed premiums throughout the term.
- Increasing term – pays out a lump sum that increases each year, in line with inflation.
- Decreasing term – pays out a lump sum that decreases each year, in line with mortgage payments or other debts.
Joint Life Policies
For couples living together, joint life insurance is a great way to provide financial security for both parties. With joint life policies, the same policy can cover each partner, paying out in the event of one or both of their deaths. This can help cover any outstanding debts or mortgages, as well as provide an extra financial cushion for the surviving partner.
Critical Illness Cover
Critical Illness Cover is a type of policy that pays out a lump sum if the policyholder becomes critically ill. For those looking to manage their finances, it provides them with the financial security needed to take time off work and focus on their recovery.
It may cover illnesses and disabilities. such as:
- Heart attacks
- Organ failure
- Multiple Sclerosis
- Loss of limbs
How Much Cover Will I Need?
One way to determine the level of cover is to work out the maximum amount your family would have to pay if you were to pass away. This includes any debts, mortgages, childcare or educational costs.
It’s essential to shop around and compare policies to find the one that best suits your needs. Different companies offer varying levels of cover, so it’s necessary to weigh up the different policy options before deciding which one is right for you.
It’s also a good idea to speak with a financial adviser. They can help you assess your needs and provide advice tailored to your circumstances.
How Do I Apply for Life Insurance?
Getting a life insurance quote is an important step in protecting your family and home. To get a quote, your chosen insurer will need a few details from you.
The main things they are likely to ask you is:
- What type of life insurance cover would you like?
- What do you intend to cover – whether it’s family or mortgage protection?
- How much cover do you need?
- How long should the policy last?
- Do you have any health conditions or lifestyle habits?
Once this information is provided, the insurer can then assess what kind of cover best suits you and provide a life insurance quote. From here, you may be able to apply for the policy online, with some companies offering instant decisions.
If you have any pre-existing medical conditions, you may be required to undertake a medical exam as well as a health and lifestyle questionnaire.
If you’re a smoker, you may need to pay more for premiums due to the increased risk of health issues that come with smoking.
How Much Does Life Insurance Cost?
The cost of cover typically depends on factors like the policy type, level of cover, and the age and health of the policyholder. Generally speaking, whole of life policies tend to be more expensive than term due to their long-term cover.
Those with pre-existing medical conditions may pay a higher premium, as they are deemed to be at higher risk. Similarly, older policyholders may pay more because of the increased risk of death.
That said, life insurance policies can still be relatively affordable, here’s some tips for getting cheap life cover:
- Shop around – different providers offer different premiums, so compare policies to find the best deal.
- Choose a shorter term – short-term policies are often cheaper to own.
- Opt for a smaller payout – the size of the payout can influence the cost of premiums. Therefore, opting for a smaller payout can help reduce costs.
- Take out cover early – the younger you are, the lower your premiums will be. So it pays to take out life insurance as soon as possible.
Ultimately, life insurance can offer valuable financial protection for your family. So ensure that you have the right level of cover to meet their needs. Head online to compare policies and to find a cost-effective life insurance option.