What is it?
Life insurance is a policy that will pay out a lump sum to your family or beneficiaries if you pass away. This will give you peace of mind that you’re family has financial security after you have gone.
You might choose the cover to pay off a mortgage, leave a lump sum to family or need it to cover funeral costs. There are different types of policies.
How does it work?
When you take out a life insurance policy you pay a monthly premium, and the insurer agrees to pay a sum of money to your beneficiaries if you die. It’s usually over a fixed term, however, some policies can run for the rest of your life.
You choose how much cover you need, and then how long you want to be covered for. You can then choose decreasing, level or increasing cover depending on what suits your circumstances the most.
Your health can affect the premium you pay. So, there is usually a medical questionnaire to complete before the insurance provider will approve your cover. Once you are covered though, any changes to your health don’t need to be disclosed to the insurer.
You can nominate your beneficiaries by placing your policy into trust. By doing this, the insurer will know who to pay in the event of your death. They will also be able to pay your nominated beneficiaries quicker than if the sum assured goes through probate. As it keeps the sum assured out of your estate, there is also no tax for your beneficiaries to pay on the lump sum.
Why take out life insurance?
Family – If your family depends on your income, the loss of that income can have a devastating effect on their future. A Life Insurance policy that pays a lump sum will give you peace of mind for your family’s future. Taking care of your family is the main reason why you should take out an insurance policy. Whether it may be for Income Protection to protect your wage, or for a Life Insurance policy.
Mortgage – Mortgage protection is designed to pay off an outstanding mortgage in the event of your death. This gives you peace of mind that your family doesn’t have the burden of mortgage payments in the future.
Funeral Costs – The average funeral cost is over £4,000, so a life insurance policy can cover the costs. So your loved ones don’t have to struggle to pay for your funeral and/or medical costs.
How much does life insurance cost?
The cost of a life insurance policy will vary depending on a few factors. These factors are…
Amount of cover you need
Length of your policy