ThinkIFA guide to ‘Life Insurance’
Simply put, life insurance is a way of providing for your dependents should anything happen to you.
It pays out a lump sum to provide your family or dependents with financial security and peace of mind and can enable them to continue with the standard of living they are used to.
Life Insurance Policy Types
The most common types of life insurance are term life insurance and whole of life insurance:
Term Life Insurance
With this policy you are covered for a fixed period, so if you die during that period your family will get a payout. For example, you might be insured for a payout of £250,000 if you die within 20 years. This policy is handy for those who might only need insuring whilst the mortgage is paid off or whilst the children are at University, so should anything happen to you, the mortgage or their future education is covered.
Whole of Life Insurance
This open-ended policy pays out whenever you die. However, as a result the premiums do usually tend to be pricier. This guarantees your family a payout whenever you die, whether that is in 5 years or 55, which can cover funeral costs or possibly inheritance tax.
What is Life Assurance?
Many people assume that life assurance is the same as insurance but they are different. Life assurance will pay out in the certainty that something will happen to you, whereas life insurance covers the risk of something happening.
Which is the Best Life Insurance Policy for Me?
It’s very important when you compare life insurance quotes that you consider your own unique personal circumstances.
You may have a permanent dependent such as a child with a disability who will always need caring for, have a large estate you want to hand onto heirs without giving them a huge inheritance tax bill, be worried about who pays off the mortgage should anything happen to you or you might be financially responsible for your children’s education.
When looking at life insurance policies it is worth remembering:
- The best Life Insurance Policy is the one which fits around your requirements and not just the cheapest
- Compare like for like Life Insurance Policies and don’t just look at the premiums but the T&Cs too
- Cheap Life Insurance is not always the best option
- By choosing a fully independent financial/insurance advisor, you can compare life insurance quotes from the whole of the market to help find the best policy