If you are young, free and single, you might not technically need life cover.
If you have a partner, children, or other relatives depending on your income to cover the mortgage or living expenses, then you certainly do need life insurance, since it will help provide for your family in the event of your death.
But do you have the right life insurance?
There are several different types of life assurance and life insurance (they are not quite the same). Both provide cover in the event of your death. With life assurance you are assured of a pay out, whereas a life insurance policy simply finishes at the end of its term. At Continuum we can help you decide what is right for you.
A life assurance policy – also known as ‘whole-of-life cover’ – is designed to last for the rest of your life. The monthly premiums are relatively high because insurers know that they’ll have to pay out eventually.
There’s no term limit, so your beneficiaries are guaranteed to receive the pre-agreed amount when you die. Some plans keep you paying until you die, but others have a cut-off point – often around 85 or 90 years of age – after which your cover continues but you no longer need to pay.
As well as paying a fixed lump sum, some whole-of-life policies are investment focused. With this type of life assurance, your insurer invests your monthly premiums, and your eventual pay-out depends on how well the investments perform.
The lump sum from a life assurance policy can be written in trust, which means that it will be received tax free. This can mean that it can be ideal to help dependents pay off inheritance tax. This is becoming a major reason for buying life assurance – although expert advice is vital to make this an effective way to avoid ‘death duties’.
Life insurance is designed to ensure that your dependents will be looked after if you’re no longer there to provide for them yourself.
Most term life insurance policies are taken out for a set period, usually between five and thirty years. This can be arranged to coincide with your retirement, or with the date you plan to pay off the mortgage.
During the term of the contract, the policy holder pays a set amount of money – the premium – each month or once a year.
If they die, their life insurance provider pays their dependents an agreed lump sum. There’s no lump sum payable at the end of the policy term.
The amount paid out depends on the level of cover you buy. You decide how it is paid out and whether it will cover specific payments, such as mortgage or rent, or used to help replace your income.
There are many variations on basic life cover. Choose a level of cover that goes down, or up. Have joint cover for yourself and your partner. You can even combine your life cover with other types of protections, such as accident cover, critical illness cover, and income protection.
Why you need to review your cover
Many of us have found we face big changes to our financial circumstances in the wake of Covid – and the disease itself has shown how important it is to have the cover we need.
This means that even if you have cover in place, it could be time to review it, and if you don’t, it is almost certainly time to start.
Remember, the cost of life cover will vary with a number of factors including age, health and occupation. The younger you are when you take out cover, the less it can cost to get the protection you need.
With the pandemic showing how vulnerable we all are, many more people are looking at cover to protect themselves and their loved ones, and providers are offering new terms and products.
We can give you individual expert advice from an adviser who will help you set up the life cover you need. Call us now to arrange a video appointment.
The chances are that we can help you find cover that is a better answer for your needs – and to pay less for it.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products, you should seek independent financial advice before embarking on any course of action.