Many people prefer not to think about life insurance, but for those that do, the minefield of options available across the market can be mind-boggling.
Life Insurance used to be purchased through a financial adviser who would outline all of the options and tell you what you need to know (albeit with their eye on the best commissions for themselves!) Nowadays, with internet trade of life insurance products becoming commonplace, it is the comparison sites who have become the new middlemen.
However with lots of them around, many using different terminologies, how can you really get to the bottom of what you need? This article will outline the types available and how they fit with your lifestyle and situation.
The broad types are "Term-based" and "Whole of Life" life insurance.
Term-based insurance suits those who have a large debt such as a mortgage, or who have dependents such as young children, who will require a replacement of the main earner's salary for childcare and who will in time become independent and no longer need protection.
Broadly speaking, if you have a mortgage, or currently have little to leave to your children if you were to die unexpectedly, then term based insurance will suit you.
Mortgage lenders will typically offer you a term-based policy when taking out a mortgage if you do not already have your own, but you may not get the best value from these as you are not free to shop around.
Prices of term-based life insurance start at a few pounds per month for under-50s.
"Whole of life" insurance guarantees a lump-sum on death, whenever that is, provided you keep paying the premiums.
Many providers offer fixed premiums for the first ten years, but after that expect them to increase every year.
A note about "Whole of life" policies: Whilst you are young, the premiums for this type of insurance are in line with the term-based premiums.
As you get older, the chance of the insurance company having to pay out increases, so they increase the premiums accordingly.
The insurance company is depending on the fact that many people will cancel their policies before they die, or at least live long enough to have spent a proportion of the assured sum.
You therefore need to consider whether it may suit you more to take out a term-based policy to cover you until around retirement age, and then invest money each month to provide an inheritance rather than taking out a whole-of-life policy and cancelling it once the premiums rise.
Life Insurance used to be purchased through a financial adviser who would outline all of the options and tell you what you need to know (albeit with their eye on the best commissions for themselves!) Nowadays, with internet trade of life insurance products becoming commonplace, it is the comparison sites who have become the new middlemen.
However with lots of them around, many using different terminologies, how can you really get to the bottom of what you need? This article will outline the types available and how they fit with your lifestyle and situation.
The broad types are "Term-based" and "Whole of Life" life insurance.
Term-based insurance suits those who have a large debt such as a mortgage, or who have dependents such as young children, who will require a replacement of the main earner's salary for childcare and who will in time become independent and no longer need protection.
Broadly speaking, if you have a mortgage, or currently have little to leave to your children if you were to die unexpectedly, then term based insurance will suit you.
Mortgage lenders will typically offer you a term-based policy when taking out a mortgage if you do not already have your own, but you may not get the best value from these as you are not free to shop around.
Prices of term-based life insurance start at a few pounds per month for under-50s.
"Whole of life" insurance guarantees a lump-sum on death, whenever that is, provided you keep paying the premiums.
Many providers offer fixed premiums for the first ten years, but after that expect them to increase every year.
A note about "Whole of life" policies: Whilst you are young, the premiums for this type of insurance are in line with the term-based premiums.
As you get older, the chance of the insurance company having to pay out increases, so they increase the premiums accordingly.
The insurance company is depending on the fact that many people will cancel their policies before they die, or at least live long enough to have spent a proportion of the assured sum.
You therefore need to consider whether it may suit you more to take out a term-based policy to cover you until around retirement age, and then invest money each month to provide an inheritance rather than taking out a whole-of-life policy and cancelling it once the premiums rise.
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