An overview of life insurance from MoneyHelper is available at this link.
A guide to Life and protection insurance is available from AdviserBook.
Life insurance can pay out a large amount or regular amounts when you die (whole life policy) or if you die within a specified period (term insurance).
Term Insurance is cheaper than whole life insurance as you can choose how long you are covered for and you pay premiums on a monthly basis, however it will only pay out if your death occurs during this period. You can also arrange joint cover to protect both you and your partner, which will pay out for the first death.
There are a number of different types of term insurance policy you can have:
- Family income benefit – pays out income rather than a lump sum
- Increasing or decreasing policy – premiums either rise over the years and your amount of cover also rises, or your cover and premiums decrease over the years.
- Renewable policy –this policy allows you to extend the term.
Whole Life Insurance is more expensive, but covers you for your entire life and pays out an agreed lump sum when you die.
You must keep paying your premiums to keep your life insurance. Your premium is decided on how likely you are to die, so if you smoke you will pay more than a non smoker, or if your job is dangerous you will pay more than someone with a safer job. Additionally your age is an important factor, and often insurance will cost more for men than for women.
Remember to check the exclusions – as many insurers will not insure against certain causes of death, or will not cover risky sports you may partake in. Make sure the insurance you buy is suitable to your needs.
You should always be aware of the flexibility of contracts – for example: will your insurance stop instantly if you miss a premium payment? Or are there any changes for extending or reducing you term or level of cover? You may also wish to investigate a “waiver of premium” which will help you cover your regular payments if you are unexpectedly taken ill.
If you plan on changing your life insurance, remember not to cancel your current life insurance until your new policy is set up.
An Advice Guide to Life Insurance is available from Which?.
As with all insurance "shop around" for the best deals but remember to check that the policies you compare offer the same levels of protection, do not decide just on the cheapest price. It is always a good idea to use the key policy features documents legally provided by insurance companies to compare policies.
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