If you have a family one question will be running through your mind - how can I protect my family when I die? A life insurance policy is one of the easiest ways to ensure financial protection for your loved ones. However, before you rush off to buy cover, there are a few things you need to know…
How does life insurance work?
Types of life insurance policies
There are two main types of life insurance - whole life & term life. These policies differ in terms of cover length and premium costs.
Whole life insurance
Also known as life assurance, whole life insuranceputs cover in place for the rest of your life. Your family is assured of a lump sum payout no matter when you die - as long as you continue paying premiums.
Whole life policies are generally more expensive than term life policies as they provide permanent cover. However, both the cost of your premiums and pay-out amount are fixed throughout the policy (if you secure a policy with guaranteed premiums).
Term life insurance
Unlike whole life cover, term life insurance only covers you for a set period of time (known as your policy term). These types of policies only payout if you die within the policy term, if not the cover simply expires and you will not receive any premiums paid back to you.
Joint life insurance
If you and your spouse share financially with your household it's worth considering joint life insurance. Joint cover protects two people under a single policy and can often work out cheaper and easier to manage than buying two separate life insurance policies.
Joint policies will either payout after the first death in the couple (first death cover) or once both members have died (second death cover). Both you and your spouse can rest easier knowing that there is financial support in place should one of you die.
There are also add ons you can buy for life insurance policies such as critical illness cover.
Who Needs a Life Insurance Policy?
How much cover do you need?
Before you choose how much cover to take out, you need to assess the financial impact of your death on your family.
When Should I Buy a Life Insurance Policy?
If you’re looking for cheap life insurance cover it’s best to buy a policy at the earliest stage possible, as this tends to be when premiums are at their lowest. This is especially beneficial if you have fixed (‘guaranteed’) premiums, meaning even as you get older, your monthly premiums remain the same throughout the life of your policy.
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