What is life insurance and do I need it?

If you’re reading this then you probably already understand why life insurance is such an important and positive product and how it can protect the people you love most. You might even have 'sort out life insurance' on your to-do list already. But like many other people, you may not have managed to get around to actually purchasing a policy yet.

Perhaps that’s because other more exciting, seemingly more important priorities have come up. It might be because you aren’t sure how it all works, or because you think life insurance will be too expensive for you. Maybe it is a combination of all of the above. If so, you are in the right place.

In this guide we will explain exactly what life insurance is, how it works, help you work out if you really need it, and why there may be no better time than now to finally sort out cover for you and your family.

How does life insurance cover work?

Life insurance is a type of insurance product that pays out an amount of money if you die. 

It sounds a little morbid, but the product works just like every other type of insurance. These policies are there to help you when bad things happen. Your mobile phone insurance replaces your phone if you break it, your car insurance covers the cost of repairs if you have an accident, and your life insurance cover looks after your family financially should the worst happen, and you pass away. 

What are the different types of life insurance policy?

There are two main types of life insurance policy plans: Term life insurance and whole of life insurance.

Term life insurance covers you for a set term, usually a number of years. You decide how long you’d like to be covered for and if you die during that period of time, your insurer will pay out the cover amount to your family. If you survive to the end of the term, which we hope you do, you won’t receive an insurance payout.

Whole of life insurance, on the other hand, covers you for your whole life, so in that sense you’re guaranteed to get a payout from your life insurance policy, because sadly we will all die one day. 

Do I need a life insurance plan?

Not everyone needs life insurance, but it may be a product worth thinking about if you have a partner or children. 

Essentially, this type of insurance is there to support your loved ones financially when you’re no longer around. Think about the regular bills that you pay as a family, perhaps the mortgage, maybe you have childcare fees or upcoming school fees. The question to ask yourself is whether your partner could manage to cover these outgoings if they lost you and your income. For many of us, that answer is no, at least not comfortably. 

How much life insurance cover do I need?

The amount of life insurance that you need really depends on your personal circumstances and what you’d like to provide to your family.

You may want to think about family life insurance when you buy a house. This is an exciting time, and so, admittedly, probably not the time that you want to think about morbid things. But your house may be the most expensive thing you ever buy, and with that probably comes a large chunk of mortgage debt. You may decide that, should you pass away, you would like your mortgage life insurance to pay off your mortgage, so that your partner isn’t left with a large debt that he/she may struggle to repay alone. This could prevent your family having to seriously change their lifestyle or, even worse, lose their home. 

Funerals are becoming increasingly expensive, so you may also wish for your policy to cover the cost of your funeral. That way the cost won’t sit with your loved ones during an already upsetting and stressful time.

There really are no rules around what your life insurance payout can be used for and therefore how much insurance you need, it’s more a case of thinking about your personal situation, your family’s finances, and what financial support would be needed if your income was lost.

If you’d like to understand exactly how much life insurance you need, give the financial advisers at Cavendish Online a call on 01392 436 193 and they will complete a free personalised assessment for you.

How much is life insurance?

The cost of life insurance depends on a few things:

•           Your age

•           Whether you smoke

•           Your general health and lifestyle

•           How much cover you want

•           How long you want to be covered for

Basically, the more likely you are to make a claim on your life insurance, the more expensive your premiums will be, just like any other type of insurance. The younger and healthier you are, the cheaper life insurance will be for you. So, if you’re considering life insurance, it’s best not to delay, simply because none of us know what’s around the corner and sadly many of us look to buy life insurance when it’s too late.

While the exact cost depends on many things, research has shown that many people actually overestimate the cost of life insurance. You may actually find that life insurance is less expensive than you think, and low cost life insurance policies can be purchased for under £10 per month. 

How can I buy life insurance?

Maybe today is the day to finally tick 'sort out life insurance' off your to-do list?

At Cavendish Online, we offer various options to help you find the best insurance. You can apply for a policy online yourself, in just a few minutes. Alternatively, you can choose to speak with one of our specialists over the phone, who can guide you through the process and help you choose the best cover for you and your family. 

For help with your new life insurance policy, call one of our consultants on 01392 241 850. 


 

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