Life insurance is a great way to provide financial protection for your loved ones. Learn more about the different types of policy plans available.
Finding the perfect life insurance plan doesn't need to be a long drawn-out process. However, it's important to understand the different types of cover in order to know exactly what you're getting.
In this article, we'll talk you through the different types of life insurance plans and how to choose the right one for you.
How does life insurance work?
A life insurance policy ensures you are covered in the event of death. Your provider will issue a lump sum payment to your family if you die at any point whilst you are covered.
This money can support your family with various finances in the difficult times ahead. Like any other type of insurance, you are required to pay monthly premiums for cover, and your policy will lapse should you not pay your premiums.
Choosing the right plan…
1. Understand the different types of life insurance
There are two main types of life insurance policy plans - whole and term life insurance. Each of these policies differs in terms of length and cost.
Whole life insurance covers for the rest of your life, paying out a cash lump sum to your loved ones whenever you die. Although whole life policies are often more costly than term policies, they provide permanent cover.
Term life insurancecovers you for a set period of time (i.e 30 years). The policy pays out a lump sum to your loved ones, providing you die within the policy term. If you survive the term, the policy expires, and you will need to buy further cover if needed.
Other types of life insurance plans include...
Family life insurance
One thing nobody wants to carry on their mind is what might happento their family if they died at any point. Family life insurance ensures your family is supported financially should the worst happen.
This type of policy plan pays out directly to your loved ones. It can help them with finances, such as living costs, mortgage repayments, household bills and other future costs.
For more information on the benefits of a family life plan, check out - How family life insurance can benefit your loved ones.
Critical illness cover
Much like death, illness can occur unexpectedly. Critical illness cover is a type of plan that pays out a lump sum in the event you are diagnosed with a critical illness (so long as it meets your provider's definition and specified severity).
Critical illness can usually be bought as an add-on to a whole life or term life policy, but can also be purchased as a separate, standalone policy.
2. Assess how much cover your family needs
When buying a life insurance policy, you need a cover amount that reflects your family's finances. In addition, you should think about the financial impact of your death on your loved ones. You can do this by working out your monthly income and outgoings, to make sure you buy the right amount of cover.
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3. Choose a policy that matches your budget
When buying life cover, it's essential to choose a policy that fits your budget. If you cannot pay your monthly premiums, your provider will end your cover early. In this case, you won't receive any money back from the premiums paid up until that point. Not having the right amount of cover could result in additional costs later down the line.
If you're looking for affordable life cover, you may want to consider term life policy. You can also buy joint life insurance cover - this protects you and your partner under a single policy. In some cases, it can even work out cheaper than buying a separate policy.
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