For those who don’t believe life insurance to be necessary, consider the following. If out of 90,000 men, aged between 45 to 55, 322 are likely to die this year, what would happen to their family? Would they have an income high enough to live without their loved ones?
For a couple of pounds a month, people can buy what many consider to be the most important financial product. In 2013, over 25,000 people claimed over £1.3 billion with an average claim of £51,500 according to the Association of British Insurers.
If you include the more multifaceted policies such as critical illness cover, than the number of claims rises over 86,000 policies amounting to a total compensation of around £3 billion.
How much cover do I need?
The amount of cover you need will depend on your circumstance. Naturally, you would want to be able to get enough to pay off your mortgage but what about other costs such as child care. If there is one surviving spouse, they will need to get a job and pay for child care or have enough savings to look after the children and run the house.
Getting a regular income pay-out
If you get term life insurance, you would get a lump sum amount of money which can be used for clearing off debts and investments. However, if you don’t want to worry about investments than you can get a Family Income Benefit policy, which makes pay-outs until a pre-agreed time period i.e. it pay-outs until your child has turned 21.
Note a disadvantage of this type of policy is that if the insured person passes away a few months before the termination date, than the monthly income will continue only until the termination date.
Single and Joint life insurance policies
Two single life insurance policies cost more than one joint life insurance policy as a joint life insurance policy only pays out once – meaning the surviving spouse will no longer be covered and hence, must buy single life insurance which could attach with it higher premiums given the increased age of the surviving partner.
Look out for changing premiums
When buying your life insurance policy, be vary of any clauses in your contract which allow the insurer to change the premiums.
This is usually the case for whole of life policies, which are guaranteed to pay once the person passes away, however typically the premiums are reviewed every 10 years.
Note, for all the reviews and the initial application, you should be truthful in all your responses else, the insurer may declare the policy to be void and your loved ones will not get the pay-out they needed.
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