Work may help us to enjoy a comfortable lifestyle and may also help us to support and care for those we love – those who are dependent on the work we do and the income we receive on that account.
If that income is suddenly and unexpectedly ripped away through the untimely death of one of the income earners, then any dependents may be significantly worse off and unable to enjoy their previous standard of living.
Life insurance exists to help those with a responsibility for providing for their loved ones and dependents the opportunity to continue to do so even in the event of their death. Here is our life insurance guide.
Who might this product be suitable for?
It might be readily recognised that life insurance is a product suitable for anyone with dependents – dependents whose well-being and lifestyle is likely to be severely compromised in the event of the your death.
With your death and the sudden removal of the income on which others relied there may be:
insufficient income to maintain mortgage repayments or to pay the rent – with the result that family members may be left without a roof over heads;
difficulty in maintaining the payment of school or university fees – with the result that children may be denied the educational opportunities for which the family had been working;
a need for help around the house through the services of a housekeeper or someone to help look after and care for any children so that the surviving spouse may return to work.
What does it typically cover?
The principle of life insurance is simple and straight forward – if you die, your designated beneficiaries receive a financial benefit.Although simple and straight forward, however, there are a number of variations on this basic theme:
Simple term life insurance – the classic and simplest form of cover is insurance fixed for a predetermined period, or “term”, providing a cash payment in the event of your death before the expiry of that term. If you survive the term, then when you do die, your loved ones get nothing;
Decreasing term insurance – if your concern is principally about the repayment of a mortgage in the event of your death, a decreasing term life policy (where the assured benefits decrease each year during the term of the cover) might be suitable for paying off a standard repayment mortgage;
Family income life insurance – if your principal concern on the other hand is less about repayment of the mortgage and more about surviving dependents’ daily income needs, this might be the type of life insurance for you;
Increasing term life insurance – unlike decreasing term insurance, benefits actually increase over the term of cover and, so, may help to take into account the effects of inflations or other changes in family and dependents’ circumstances;
Whole of life insurance – whilst the policies already mentioned insure life for a given, fixed term, whole of life insurance pays out irrespective of any term, whenever the insured happens to die. As you might expect, therefore, this is the most expensive form of life insurance
Over 50s life insurance – this is promoted as a way to leave a cash sum upon your death, typically of a smaller amount than other life insurance policies (sums of £2,000-£5,000 are not uncommon). These are suitable for people who may not be able to get insurance elsewhere, as there is guaranteed acceptance in to the plan and no medical needed.
Is there anything I need to know?
Although the principal of life insurance is relatively straight forward, there are still a number of questions you might want to ask about the most suitable type of cover for you and your dependents:
chief amongst these questions is likely to be just how much life insurance do you need;
to arrive at this figure, it may help to list the mortgage and other debts you are likely to have, together with a breakdown of ongoing expenditure on such food, heating, clothing and perhaps the cost of putting children through school or university;
the government backed Money Advice Service suggests that you might want to consider additional insurance cover that automatically waives your need to continue paying life insurance premiums if you are temporarily unable to work; and
if you are one of a couple, you may also need to decide whether to opt for a single or joint life policy.
Life insurance – in one of its many forms – offers a way of ensuring that even in the event of your untimely death, your dependents may still rely upon a certain financial security.