Life Insurance

What is life insurance?

Life insurance offers peace of mind by ensuring that your loved ones, such as your children or partner, will have financial security if something happens to you. When you’re getting life insurance, there are a few key things to remember. You’ll want to figure out the right type of policy for your situation, decide when you need it, and think about how you want to go about getting it.

How does life insurance work?

Life insurance provides financial assistance to your dependents after you pass away, either through a lump sum or ongoing payments. The payout amount is determined by the coverage level you select.

You have the flexibility to choose how the payout is distributed. It can be earmarked for specific expenses like mortgage or rent, or you can designate it as an inheritance for your family. This way, you’re ensuring that your loved ones receive the support they need even when you’re no longer there.

What types of life insurance are there?

The two main types are…

Term life insurance 

Which is all about having coverage for a fixed period, like say, 5, 10, or 25 years. If you happen to pass away during this time, the policy pays out. There are three main flavors of term life policies:

1. Level Term: This one gives a lump sum payout if you happen to pass away within the set term. The coverage amount stays the same throughout, and it’s a straightforward and budget-friendly choice.
2. Decreasing Term: With this policy, the coverage amount goes down each year. It’s designed to match up with things like repayment mortgages where your loan amount gets smaller over time.
3. Increasing Term: Here, the coverage amount actually goes up over the policy’s life to keep pace with rising costs and inflation.

So, basically, term life insurance gives you choices based on what you need and where you’re at in life. You get to pick what fits you best

Whole of life cover

Whole of life insurance policies work a bit differently. They provide a payout regardless of when you pass away, as long as you’re keeping up with your premium payments.

People often use these policies to help cover things like funeral expenses or for planning around Inheritance Tax.

However, it’s good to keep in mind that these policies tend to be pricier than shorter-term options. Also, there’s a potential situation where if you live longer than you anticipated, you might end up paying more in premiums than what you eventually receive as a payout. So, while they offer lifelong coverage, they come with some trade-offs to consider.