Regardless of your family’s situation, there will be a life insurance policy that is perfect for you! Sadly none of us can prevent death, but what we can ensure is that our loved ones are financially secure should the worst happen. There are several life insurance plans designed to protect your loved ones for the future ahead.
In this article we’ll look at:
What is life insurance and how does it works
The main types of policy plans
The amount of cover you may need
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What is life insurance and how does it work?
Life insurance is a type of contractual agreement between a policyholder and the insurance provider. It’s designed to pay out a cash lump sum payment to your family upon your death, providing a financial cushion during this difficult time.
When you apply for life insurance cover, you usually need to answer a few health and lifestyle questions. The answers you give help to generate a quote - which is an estimated cost of your monthly cover costs. Naturally, the type of cover you choose will reflect how much your premiums cost - but we’ll get to that in just a minute.
Once you take out a life policy, you start making regular monthly premium payments to your insurer. You need to keep up with these payments otherwise your insurer may cancel your policy. In this case, you won’t be able to claim any money on the premiums previously paid.
Types of life insurance plans
There are several types of life insurance plans which can be used to help your family cover an array of finances. Two of the main types of life insurance cover are whole life & term life insurance. These particular policies work differently both in terms of cost and cover length.
Whole life insurance (also known as life assurance)
Just as the name would suggest, whole life insurance ensures protection for the whole of your life (from when you take out cover). When you die, your insurer pays out a cash lump sum, helping your family manage any current or future costs without any worries.
Whole life policies are generally more expensive than other types of life insurance plans. Despite this, your family is virtually guaranteed a pay-out - so long as you continue making monthly payments.
There are two main types of whole life cover:
Balanced - the cost of your monthly premiums remains fixed throughout your cover. For that reason, you pay the same for premiums even as you get older and are at risk of developing health conditions. The payout value also remains the same during the policy.
Maximum - Your policy is linked to an investment fund which your insurer pays into each month using the money from your monthly premiums. The aim is to generate a return that covers the eventual pay-out amount. If the investment fails, your insurer may increase your premiums to cover the loss.
Term life insurance
Whereas whole life cover protects you permanently, term life insurance operates temporarily (i.e 20 years). Term life policies only payout if you die within the policy term as agreed upon with your insurer. Should you survive the policy term, your cover expires and you won’t receive compensation for the premiums paid prior.
Term life insurance has three levels of cover:
Level term - The cost of your premiums and pay-out value are fixed throughout the length of your cover. Much like whole life insurance, buying cover at a young age can save you money on premiums.
Increasing term - The pay-out value of your policy increases overtime to protect the eventual amount from inflation. Because of this, your premiums may also rise.
Decreasing term - Designed to cover large payments like a mortgage. The pay-out value decreases over time as you make repayments.
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Joint life insurance
If you and your spouse share financial responsibility, you may want to consider a joint life insurance policy. This type of policy covers two individuals under a single policy, an ideal choice for couples. Joint policies are often considered easier to manage than taking out separate policies, and in some instances can even save you money.
Joint policies typically payout after the first death within the couple (known as ‘joint life first death’ cover). The policy then ends leaving the surviving policyholder to take out further cover if needed.
Family life insurance
Rather than being a specific type of cover, a family life insurance plan refers to any type of policy used to provide financial protection for your loved ones. This can be represented with both whole life and term life cover.
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Mortgage life insurance
Mortgage life insurance is designed to help your family pay off your home's mortgage after you’ve died. Should you die before your mortgage is paid off, that debt doesn’t disappear. Instead, your lender will look to your family to ensure payments are made. If they cannot make these payments, the house may be repossessed.
Decreasing term life insurance is designed to cover large payments like a mortgage. The pay-out value of your policy is linked to your mortgage balance. Therefore, if you were to die, your family can use the pay-out to pay off the mortgage, which they may struggle to do on their own.
Over 50s life insurance
This type of life plan is designed specifically for individuals who are typically aged between 50-80. As you get older, the cost of life insurance increases, that’s why over 50s life insurance provides affordable cover to protect your loved ones in the event of death.
These policies pay out a cash lump sum when you die - once the insurer's waiting period has passed. This type of policy is ideal for those with pre-existing medical conditions who may usually be denied cover.
To talk get a quote or apply for Over 50s life insurance, please call our advised team on
01392 436 193
Critical illness insurance
Although critical illness Insurance doesn’t cover you from death, it can be a handy way to protect your family's finances. Your insurer pays out a one-off lump sum in the event you are diagnosed with a critical illness that meets your chosen provider's specified definition and severity. This pay-out can help act as a replacement for your monthly income, assisting with any monthly outgoings your family has.
How much cover will I need?
Before you decide on the type of plan you need, you should assess the financial impact your death may have on your family. That way you can make sure you take out the right amount of cover and avoid over-insuring.
The payout from a life insurance policy can help your family with:
Living expenses
Household bills
Funeral costs
Mortgage repayments
Childcare
Covering outstanding debts/loans
Not sure how much cover you need or what type of policy to opt for? We’re here to help. At Cavendish Online, we strive to help customers find the best policy at an affordable cost. Our expert advisors will guide you every step of the way, making recommendations based on your current situation.
Either apply online for a quote or give our advisers a call on 01392 436193, today!
