Basic Guide to Life Insurance

Have you ever thought about what would happen to your dependents if you were to die unexpectedly? It’s not something we generally like to think about, so you might not have given any consideration to life insurance. But life insurance can provide more than just a safety net for your family and loved ones when you die. It can pay out a large cash sum that can be used to pay off household bills, outstanding debts, a mortgage or simply assist with the day-to-day running of the household.

Another reason why many people are put off life insurance is because they don’t know enough about it. What exactly is it? How much is it? What is covered? All these things are good questions to ask and are worth asking a life insurance advisor. However, so you don’t go into any future meeting blind, here are some of the basics.

What types of life insurance are there?

There are two types of life insurance. The first is known as whole-of-life insurance. Whole-of-life insurance is generally more expensive because it is usually more comprehensive and covers you whenever you die. A large lump sum is paid out upon your death to your dependents.

The alternative is known as term insurance. Again, as the name suggests, this type of insurance is just valid for a specific term. The length of term is generally set by you. This category can be broken down further as there are several types of term insurance.

The most common is mortgage protection cover. This is a type of decreasing term cover. It is designed to cover mortgage repayments if you die during the term. Therefore, as your mortgage decreases so does the level of cover and thus your monthly payments. Some companies offer two types of mortgage cover in relation to your life insurance package: Legal and General cheap life insurance packages flexibly allow you to opt for decreasing cover, or, what’s known as level term insurance, where the sum assured stays the same throughout the term.

Exclusions

Be careful of exclusions. For example, some sports are excluded and so are some diseases and illnesses. You can also take out critical illness cover, which covers a much broader range of illnesses under the policy.

Costs

The cost will depend largely on you and how much you want to receive as the payout. With mortgage repayment insurance it will also depend on the size of your mortgage. Prices can start from as low as £5 per month, depending on your health, age and type of policy you’re looking for.