Make life insurance your new year’s resolution
The start of a new year is an ideal time to look afresh at your finances. Many people don’t have life insurance, but it could be a vital piece of cover to protect your family.
If you have a spouse or dependants that rely on your income then life insurance is definitely worth considering. Should you die, then having life insurance should ensure that the loved ones left behind are looked after financially. The reason that people tend to shun life insurance is because they consider it to be a ‘luxury’. That it’s too expensive to consider it a necessity. It can be incredibly affordable, however there are different types of insurance so it’s important to find something that suits your circumstances and offers good value for money.
Types of life insurance
Level term insurance
Term insurance covers you for a limited time – many people take this out for the same length of time as their mortgage so that repayments are covered. Level term insurance means that the payout you get remains the same no matter when you die during the term of the policy. For example, if you are insured for £150,000, your beneficiaries would receive the full amount whether you died in the first year of the policy or the last.
Decreasing term insurance
As the name suggests, the payout you receive will decrease over time. This is the most common cover taken alongside repayment mortgages as the outstanding debt also decreases over time. Because the risk of paying out a large amount is reduced, these policies are much cheaper than level term life insurance.
Guaranteed whole-of-life insurance
A whole of life policy is pretty self-explanatory – rather than being limited to a term, you will be covered whenever you die, whether you’re 34 or 94. However, because the payout is guaranteed, these tend to be more expensive as a result.
How much cover should I opt for?
How long is a piece of string? Life insurance comes in all shapes and sizes, and your own personal circumstances will dictate how much cover you should go for.
Try not to skimp on your life insurance cover – you’ll want to make sure that your family are adequately protected, but at the same time you don’t want to pay over the odds for cover that you don’t actually need.
Things to take into consideration are the size of your mortgage, other monthly outgoings and any other benefits such as death-in-service payments from your employer.
When is the best time to take out cover?
It’s never too early to get life insurance – in fact, the sooner you are able to take out cover, then the more affordable your policy is likely to be. The younger, fitter and healthier you are, the lesser the risk to the insurer that they’ll have to payout whilst the insurance is in place.
If you do have any health issues, or you’re a smoker, don’t be tempted to lie on your application to try and get a cheaper policy. If you were to die as a result of any of these conditions (even if the link is a little tenuous) your cover may be invalidated leaving your loved ones without a payout.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.