What types of life insurance are there?
There are two main types of life insurance:
- Term life insurance policies: run for a fixed period of time (known as the ‘term’ of your policy) – such as 5, 10 or 25 years (to cover a mortgage term for example).
These kinds of policies only pay out if you die during the policy. There’s no lump sum payable at the end of the policy term.
- A whole-of-life policy: will pay out no matter when you die, as long as you keep up with your premium payments.
What isn’t covered?
Life insurance usually only covers death – if you can’t provide for your family because of illness or disability, you won’t be covered.
Some life insurance policies provide a terminal benefit, although these are not automatically granted. A terminal benefit will pay out on diagnosis of a terminal illness. Check the terms and conditions of your policy to see if you’re covered.
Most policies have some exclusions (things they don’t cover). For example, they might not pay out if you die due to drug or alcohol abuse, and you normally have to pay extra to be covered when you take part in risky sports.
If you have a serious health problem when you take out the policy, your insurance might exclude any cause of death related to that illness.
Do you need life insurance?
If you have:
- dependants, e.g. school age children
- a partner who relies on your income, or
- a family living in a house with a mortgage that you pay – a life insurance policy can provide for them if you die.
You might also want a policy which covers your funeral expenses.
You can’t rely on the government to take care of your family – the money they would get from the state is much lower than you’d probably expect.
Who doesn’t need it?
You may not need life insurance if:
- you’re single
- your partner earns enough for your family to live on
- you’re on a low income and could be eligible for state benefits.
How much does life insurance cost?
Life insurance can be very good value. The Mortgage Mom has access to a large panel of protection providers so can ensure the right solution can found for you without you having to lift a finger!
The price you pay for a life insurance policy depends on a number of things.
- your age
- your health
- your lifestyle
- whether you smoke
- the length of the policy
- the amount of money you want to cover, the length of the policy, but also your age, your health, your lifestyle, and whether you smoke.
For example, the younger you are and the less likely you’re to die from a medical condition, the cheaper your policy is likely to be.
Have you already got it?
If you have an employee package that includes ‘death in service’ benefits, this will cover you for a multiple of your salary and you might not need additional life insurance.
It’s up to you to work out if this policy is enough to cover your needs and whether or not you need an additional life insurance policy.
Bear in mind if you stop working for that employer, you won’t be covered under their policy anymore.