Insurance – in particular, life insurance- makes us think about things we’d rather not consider. But for those who have families and/or dependents, it makes a lot of sense to consider taking out a policy. Knowing why you’re taking out a policy is also important. In addition, there are many different types of life cover.
The whole process of buying life insurance can be rather daunting. As a result, we aim to explain it in the most straightforward manner possible.
Different Types of Life Insurance
When it comes to life insurance, you have a choice. Different types of policy are there to serve different purposes and not all of them actually last a lifetime. It all depends on the contract you take out. For example, there is…
- Term Life Insurance: This type of policy only covers an individual for a set amount of time. It is usually taken out by those who may be in a risky situation for a while (i.e., soldiers going off to war).
- Decreasing Term Life Insurance: Premiums decrease on a yearly basis. In most cases, they’ll match up with your mortgage repayments.
- “Whole Concept”: This is probably a bit more expensive than other types. However, the goal of it is to cover you for your entire life.
- Convertible: This is a fixed-term policy, but at the end of it you’re given the option to switch to a “whole of life” policy.
Does age matter? Life insurance for over 50s
Over 50s life insurance is an option for those between 50 and 79. In fact, it is guaranteed. What’s more, there’s no necessity to undergo medical assessments. You receive cover for the duration of your life, but premiums stop between 85 and 90.
Note: There is something called a “qualifying period” that last one to two years. Should you pass during this time, beneficiaries will only receive what has been paid into premiums.
So just how much life insurance cover does one need?
The amount of cover you need really depends on circumstances – as with all types of cover. If you are unsure, the best thing to do is to speak to your financial adviser. Of course, there is also the option of using a life insurance calculator which can give you some idea of what you should look for.
But there is another way of figuring out whether or not a life cover policy is a good idea. Just follow these simple steps:
- Consider your outstanding debt (this includes how much you owe on your mortgage).
- Calculate the amount you pay towards both household income and the needs of your family.
- Try and work out how much you can afford to pay for cover.
- See what other sources of income your family receives (such as a spouse’s salary).
- Balance the cover needed with the amount you can actually afford.
In addition, don’t forget that there are joint life insurance policies. In some cases, the payout can be a lot bigger and the premiums you pay won’t be as high.