Life Insurance

Taking out a life insurance policy means that if you should die unexpectedly, you can ensure that your loved ones are provided for financially. The payout from a life insurance policy will either be made as a lump sum or in a series of instalments, depending on the policy. There are several different kinds of policies available in the UK market. In general however, most policies can either be defined as ‘term policies’ or ‘whole life policies’, with the remainders being linked to your pension (‘Pension Term Assurance’). You may also wish to include critical illness cover, to help you with the everyday living costs that come with treating and dealing with a serious illness.

Term policies will provide protection against the policyholder dying within a pre-agreed time period (the term), although if you die after this period, you get nothing. If you take out term life insurance as a couple, the insurance company would pay out if either of you were to die over this period. As the name would suggest, whole life policies ensure that when you die, your dependents receive an agreed sum of money. Your lifestyle will affect the cost of your premium, since if you live longer the insurer needs to pay less overall as you have contributed more to the policy.

Important Tips for Buying Life Insurance

• Life 'Insurance' is different from Life 'Assurance' because it is not a certainty.  You would insure yourself against something unexpected happening, but would take out Assurance to minimise your financial exposure to something inevitable.

• If you take out any type of 'Term' insurance product, this means that you are choosing a set period of time when your cover will be active.  Beyond this period, your cover is no longer valid.

• The policy will be cheaper the less 'risky' you are to an insurer.  If you smoke, are in poor health or enjoy high-risk sports, statistically you are more likely to die, and therefore the cost of your premium will be higher.

• Joint policies for couples should be approached with a certain amount of caution.  The average joint policy pays out only after the first person dies, but for a relatively small amount more you could get separate policies with two payouts, which would have a greater benefit for your family (especially when you consider the expense of inheritance tax).