Life insurance is one of those terms that we hear thrown around a lot, but not everyone knows what it actually is, or the importance of it. Whilst not everyone needs life insurance straight away, it can be vital for many and is not something that should be sidelined.
What is Life Insurance?
Like any insurance, life insurance is a contract between a policyholder and an insurer. This type of insurance is where the insurer commits to pay the chosen recipient(s) a sum of money upon the death of the policyholder.
The recipients will be chosen by the policyholder and this cannot be changed after death. Depending on the type of insurance contract, other life events such as terminal or critical illness can also trigger the need for payment.
Types of Life Insurance
There are various types of life insurance, the main ones being whole-of-life cover and term life insurance.
Whole-of-life cover insurance guarantees payment to beneficiaries, regardless of when the policyholder dies. Other types of cover will only pay if the policyholder dies before a specified date. Because these policies are guaranteed to be paid at some point in the future, they can be more expensive.
On the other end of the spectrum, term life insurance guarantees beneficiaries payment if the policyholder dies within a specific time period. This is a lower-cost option and is usually chosen to complement a mortgage.
Other types of life insurance include:
- Renewable term insurance (a policy that provides cover for a fixed time, but which can be extended when that time comes to an end without you having to undergo further medical checks)
- Joint life insurance (for couples)
- Death-in-service benefits (where a company pays a sum of money to the family of the employee who has died whilst hired by them)
- Income protection
Why You Need Life Insurance
Like any type of insurance, life insurance offers assurance and peace of mind. It is mainly needed if your death would mean a financial impact on family and loved ones. Life insurance ensures provision for those closest to you and without it, they could be negatively affected. The most common reasons to choose life insurance are:
- Buying a new home – Paying a mortgage
- Getting married – Covering both you and your partner for assets
- Having a child – Providing for your offspring and preparing for the unexpected
- Inheritance tax – Avoiding large dents in your children’s inheritance money
- Paying for final expenses – Including burial costs, debts and estate administration
Whilst it is something that many people put to the bottom of their to-do list, life insurance is something that you will want and need to give some serious thought to.
Contact Us For Life Insurance Advice
It can be hard to know where to start when it comes to life insurance. What type do I need? How long should I get it for? Who should my beneficiaries be? These types of questions are bound to go through your mind and that is where The Mortgage Mom is here to help.
We can offer you expert advice on every aspect of life insurance and guidance as to whether you need it. The Mortgage Mom has access to a large panel of life insurance protection providers so we can find the right life insurance solution for you, without you having to do much at all! Get in touch today to find out more.