Many of us automatically presume that we will live a long, healthy and happy existence, and planning for the possibility of our death is not something we ever think about. If you have any dependants, it is very important to consider how they would cope financially if you died unexpectedly. You need to make sure that you leave any dependants in a financially secure position, which will hopeful enable them to stay in their present home and pay important bills without any additional worry.
Life insurance is a personal insurance plan taken out by an individual against their own life, which ensures that funds are made available to their spouse and/or family in the event of their death – it could also be used to protect a mortgage, estate or business. It involves the payment of regular premiums to the insurance company and, in the unfortunate event of death, will pay out either a lump sum or a regular income to the “trustee” or next of kin.
It is not only the long-term financial requirements of your family that need considering, such as, household bills, education fees, etc., it is also the short-term requirements, such as funeral costs, that need to be considered. There are obviously many life insurance policies available to suit your individual requirements and that is why it is important to “shop around” until you find the right one. You can easily obtain quotes online to give you an idea of the monthly premiums, but do always read the small print first.
Although there are many different types of policies with different levels of cover available, this list will hopefully give you some idea of the main ones that are on offer:
Family Income Benefit Life Insurance
This is one of the least expensive forms of life insurance and it actually pays out an income rather than a lump sum. Following the death of the policyholder, it will provide the dependants with a monthly payment until the end of the policy’s term.
Mortgage Life Insurance
This can be taken out on a single or joint life and is designed to pay off the mortgage in the event of the person’s death – the cash sum being paid out on the first claim only.
Whole Life Insurance
This policy is not set to a specific term and will continue to protect the interests of the policyholder until they die or surrender the policy.
Level Term Life Insurance
This policy remains level for a fixed term and you can select its duration, which is generally 10, 15, 20 or even 30 years. Once the term is selected you can’t usually change it until the policy expires.
Income Protection Insurance/ Accident and Sickness Insurance / Redundancy Insurance/ Critical Illness Insurance and Long Term Care Insurance
These are just a selection of other individual policies that are available and they do exactly as they say- covering you for a multitude of other problems that may arise whilst you are alive. If you are ever unfortunate enough to be made redundant, become injured at work, develop a short-term or long-term illness preventing you from working for a period of time, etc., then these policies could all be very beneficial to you by replacing valuable loss of earnings. Policies, like Critical Illness Insurance, can be taken out on their own or linked in with another plan – however, they have been under criticism in the past due to their reluctance to pay out when required. Although these policies can be very worthwhile, they can also be rather off-putting due to their rather large premiums.
Selecting a policy/policies that suits your requirements is of course very important, and could save everyone concerned from a great deal of additional upset and unnecessary financial worry. It is, however, equally as important to be sensible about the level of cover that you take out and make sure that you don’t adopt exceptionally high premiums that may begin to cripple you financially in the future – this may result in you surrendering your policy/policies and suddenly finding yourself in a position where you are not covered at all!
