Life insurance really is an essential product for those who have loved ones who would struggle without their income in their absence. It is a product that can provide peace of mind because we know that at least, the financial needs of those we love are protected whatever happens. Many people do not even begin to think about insurance until they are at a stage in life where they have responsibilities. To this effect, it’s a case of you don’t know about it until you need it. Here’s our beginner’s guide to life insurance to get you started.
What is life insurance for?
Life insurance pays out a lump sum cash payment to nominated beneficiaries on your death. It is designed to be used as a risk mitigation product. It ultimately reduces the financial burden on your family so that they can do the emotional hard work of coming to terms with your death without financial pressures. Find out more about what life insurance involves online.
It ultimately reduces the financial burden on your family so that they can do the emotional hard work of coming to terms with your death.
How much cover should you take out?
This depends on how much you think your family will need if you are not around. Many people choose to buy a product that would cover at least 5 years of their annual salary so that their family have enough space to plan their next move. Some focus on the remainder of their mortgage and paying this off so that the family always have a roof over their heads. Money Expert compare life insurance products so you could have a play about and choose a level of cover which matches up with an affordable monthly premium.
What other factors affect the cost of life insurance?
It is not only the amount of coverage that you need that will affect your monthly premiums but also your age and your health. Insurers will tend to make an assessment on your lifestyle and any health conditions that you have. Read our post on healthy lifestyle tips and see if you could reduce your premiums by living a bit smarter.
How long should the policy last?
Usually, life insurance products last for 25 years although you can purchase longer or shorter terms if you need to. Some products can be purchased as a whole life term. This means that so long as you keep up payments, the policy will always pay out no matter when you pass.
Should the level of insurance change over time?
Some products do allow you to alter the level of cover over time if you need to. You might, for instance, find that as your financial obligations lessen with your growing family that you no longer need so much coverage. If you think this might happen, choose a product that will allow you to alter levels of cover over time.
as your financial obligations lessen with your growing family that you no longer need so much coverage.
Saving tax and hassle
A benefit of life insurance for the family that you leave behind is that it can save them in terms of the tax bill following your passing as opposed to leaving them money in a will. It also helps reduce the hassle because insurers tend to make it easy to make a claim due to understanding the pressures the bereaved are under.