Life insurance will pay out a lump sum of money to your family when you pass away. It is also known as life assurance.
Life insurance is a protection product that can support your family should you pass away unexpectedly. In the event of your death a life insurance policy would give your family a lump sum of money to help secure their financial future.
Usually a life insurance policy would be taken out on the main income earner or earners in the family but you can also protect housewives and househusbands to cover the costs of childcare.
Life insurance can give you peace of mind knowing that if the worst were to happen, then your children and partner would have the financial support they need.
A life insurance policy can be bought to:
You can select how much life insurance cover you would like and either choose a level-term or decreasing-term for your policy.
The amount you wish your family to receive as a pay-out is up to you and it can be based on your outstanding mortgage, your income or the age of your children and the number of years they have until adulthood.
The amount of cover families need will vary from household to household so make sure you have the right amount of cover for your situation.
During a level-term insurance policy the amount of money paid out on your life cover will remain the same throughout the term. If it is a decreasing-term policy the lump sum will decrease as the term continues, this is usually in line with a mortgage repayment or age of children.
As with the amount of cover you have, you can also choose how long you would like your policy to last. It may be for a set period of time, for example thirty years, or a whole of life policy that will cover you until you pass away.
Life insurance premiums are based on several factors but most importantly the amount of cover will affect your premiums as will the type of policy you take.
The most affordable type of life insurance policy is decreasing-term cover, followed by fixed-term and finally a whole of life policy. A whole of life policy will incur higher premiums because the insurer will inevitably have to pay out.
The cost of your life insurance policy will not increase unless you have a reviewable policy. During a reviewable policy you will pay the same amount for a number of years, maybe five or ten years, then review your policy to see if the cover is still in line with your requirements. At the point of review your premiums may decrease or increase.
It is possible to get a joint life insurance policy to cover yourself and your partner but they may only pay-out on a first or second death basis. Two single policies are usually no more expensive and can provide two pay-outs when you die.
Like life insurance, critical illness cover will pay out a lump sum if you are diagnosed with a serious illness as stated in your policy. Examples may include heart attack, stroke, cancer, kidney failure and multiple sclerosis. This list is not exhaustive and each policy will cover different illnesses.
You can choose to add critical illness cover to your life insurance for a small increase in your premium.
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