Life Insurance Guide

Put in simple terms, life insurance covers your family's financial needs should you die. If you are the main breadwinner or are a large contributor to the family's financial pot, then this will give you the peace of mind that loans are paid off and long term financial goals achieved if you are no longer around to pay for them. The money can be used to pay off debts or large expenses such as mortgages, school fees or childcare. It can also be used to shore up enough financial support to replace a lost income so your family can cover day-to-day living expenses - utility bills, food and clothing.

This type of cover is all about relieving your loved one's financial woes in the event of your death. Incidentally, life insurance means the same as life assurance which is a more accurate label because ultimately there's no way out of death ... it is assured for us all!

Types of cover

There's quite a list of types of life cover available and we've covered the main ones below. The terms and conditions of each policy will vary, but in all cases, the premiums reflect the benefits of each type.

Look under the bonnet

Careful thought must be given to each type of insurance, so you understand exactly what the benefits are and how the length of term and amount insured chosen can play a part. For example, if you take out a family income benefit insurance plan for, say, 20 years and you die within the first five years of its start up, then your family would receive monthly income pay-outs for 15 years. But were you to die in the last five months of the policy term, then regardless of how much in premiums has been paid in, your family would only receive five months' worth of pay-outs.

There are two different types of life insurance premiums to get to grips with.

The first is 'guaranteed' and the second 'reviewable'.

Guaranteed premiums means the insurer guarantees the policyholder that premiums will not be increased during the policy's entire term. No one will be surprised to learn that a policy with reviewable premiums means that the company can (and will) review a policy at intervals during the term. Policyholders will most notice the difference between these two in the premiums they are quoted. Naturally, you can expect the guaranteed premiums policy to be more expensive.


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