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| Life Insurance |
Life insurance is one of those fascinating subjects which appears desperately simple on the face of it, but which becomes more complicated and involved as you dig below the surface and consider the many variations that are available on the basic theme. What remains the most straightforward, however, is that some form of life insurance cover is a must if you want to offer financial security to your family and loved ones.
When deciding to buy life cover it is essential to have some understanding of the different types in order to compare life insurance quotes meaningfully.
Whole life insurance – this is effectively a hybrid, combining both life cover and an investment plan. It provides cover for as long as you live. It also builds up an investment value;
Endowment policies – these are similar to entire life policies in so far as they pay out the assured benefits if you die within the insured term, but also pay out if that term expires before your death. However, this can be an expensive way of buying a combined life cover and savings plan;
Level term life insurance – this is life cover at its simplest and most popular. For a relatively modest monthly premium, the policy pays out a guaranteed lump sum in the event of your death within the specified term of the life insurance cover;
Mortgage life insurance – as the name suggests, this is a form of life insurance, specifically designed to cover the repayment of the outstanding balance on a mortgage in the event of your death. The term of the insurance therefore reflects the term of the mortgage, and, as that outstanding balance declines over the years (more slowly during the early years), so to do the benefits payable under the terms of the life cover;
Decreasing term life insurance – similarly, this life insurance also pays out a decreasing lump sum as the years go by. Unlike mortgage life insurance, however, decreasing term life insurance decreases at a fixed rate year-on-year, rather than matching the balance on the outstanding mortgage;
Family income benefit life insurance – instead of the assured lump sum paid by a conventional term life insurance, in the event of the policyholder’s death this variation pays a tax-free annual income for the remainder of the policy term;
Increasing term life insurance – as the name recommends, this differs from a level term insurance in so far as the benefits payable increase year-on-year, at a rate agreed at outset. Together with the closely-related index linking of life insurance, these types of cover provide a very useful, in-built mechanism for reflecting changes in incomes and in inflation over the years.
To conclude, although you can easily agree that some form of life insurance is more or less essential, the picture can be complicated by the wide range of life insurance products to choose from. When comparing life insurance quotes, the choices depend on whether you want:
Combined Life insurance cover and an investment plan or life cover only;
A simple level term life insurance that pays out a fixed, guaranteed lump sum in the event of your death, or benefits that can be reduced as the years go by (to protect a repayment mortgage, for example), or benefits that need to be increased (to take into account your rising income or the effects of inflation).
This article does not represent ‘financial advice’ as each person’s individual requirements will be unique to their needs. If there is something in the article which you decide to rely on, then make sure you check those details with the person from whom you purchase any product or service.
The views in this article represent those of the author and not those of Net basic Limited.
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