Life Insurance Options
Life Insurance Options
There are many different types of life insurance: some protect a mortgage and some protect all your dependants, while others provide a way to mitigate inheritance tax. So far here we’re focusing solely on life insurance taken out to provide money for your family if you or your partner were to die. This is something every parent, partner, or person with any other type of dependant needs to consider. Speak to one of our expert Life Insurance advisers today! What you need to know!
1. Level term life insurance pays out a set amount if you die within a fixed term
This is the simplest type of life insurance and the name actually tells you all you need to know.
Level: The payout you get doesn’t vary. It’s always at a set amount regardless of when you die during the term, eg, £200,000.
Term: You only get a payout if you die within a fixed term, eg, 18 years
So all in all the cover guarantees a lump sum payout upon death to your dependants within a fixed time, for example, £200,000 if you die within the next 18 years.
2. Roughly cover 10 times the annual income of the highest earner till kids have finished full–time education
The rough rule of thumb is to cover 10 times the main breadwinner’s income, yet you don’t have to stick with that. It may just be a case of do what you can afford – the budget planner should help. Here are some things you should take into account. It should cover.
– Any outstanding debts that need to be paid off (including a mortgage if you don’t have a separate policy)
– Immediate outgoings your dependants would need to pay
– Future spending you would have wanted to make, eg, university fees for the kids
– Any additional expenses a death may trigger, such as funeral costs
3. Two single policies can be better than joint cover
When buying level term life insurance, you can either get a single policy or a joint couples policy. If both you and your partner are getting life cover, a joint policy may be marginally cheaper than getting two single policies, but it will only pay out once, usually on the first death. You used to be able to get a policy paying out on the second death but they have now become incredibly rare.
Joint policy: The pros
…a joint policy is cheaper than two single policies.
…if you are married but have no dependants it’s much less hassle to set up a joint policy compared to two single ones.
Joint policy: The cons
…if you have dependants you will only get one payout, usually on the death of the first policyholder. Single policies, however, pay out twice.
…if you split with your partner you may have to cancel the cover (unless you’re still on good terms) and buy two single policies, priced on your new age and health, which will be more expensive.
Two single policies: The pros
…each policy will pay out on the death of each person, rather than just on the first death, which is what happens with a joint policy. So you get two pay–outs rather than just one.
Two single policies: The cons
…two singles policies are typically more expensive than a joint policy.
… Make sure the cost is fixed each month with ‘guaranteed premiums’
When you buy level term cover you will be given two choices of premium (which is the official name for monthly insurance payments). It can be guaranteed or reviewable.
If your premiums are guaranteed, your insurer will never change the price, so you’ll know what you’ll be paying over the life of the policy. Reviewable premiums, on the other hand, cost less at first, but your insurer can hike costs later on, meaning a cheap deal can potentially become costly as you age.
For expert Life Insurance advice get in contact with our specialist adviser today on 028 9332 2822 or alternatively drop us an email on email@example.com. We look forward to hearing from you.